Professional Documents
Culture Documents
by: Julie Torgerson , Faiysal Kothiwala, Adrienne Shamku and Patriva Thapa
Table
of
Contents
Background
..................................................................................................................
3
Summary
of
the
Analysis
..............................................................................................
4
Alternative
1
................................................................................................................
6
Alternative
2
................................................................................................................
9
Implementation
.........................................................................................................
10
Appendices
................................................................................................................
12
Background
Victoria
Heavy
Equipment
Limited
is
the
worlds
second-largest
producer
of
mobile
cranes,
led
by
progressive
entrepreneurial
chief
executive
officer
Brian
Walters
who
is
considering
taking
a
less
active
role
in
the
business.
But
before
he
can
embark
on
his
own
personal
endeavors
he
feels
that
his
firm
needs
improve
on
its
current
product
line,
competitive
position
and
organizational
structure.
Victorias
product
line
currently
focuses
on
the
custom
segment
of
the
market.
Although
the
market
size
of
this
segment
is
unknown
the
total
world
mobile
crane
market
is
said
to
be
a
$945
million
industry.
Victorias
main
crane,
which
accounts
for
majority
of
its
sale,
is
the
LTM
1000
with
5
different
models
each
with
numerous
options.
Each
cranes
is
custom
built
in
sixty
days
to
the
preference
of
the
customer,
usually
a
contractor.
Aside
from
this
model
Victoria
carries
the
A100,
which
is
one
of
a
kind
in
this
industry,
the
main
feature
of
this
crane
is
its
ability
to
reach
heights
of
61
meters,
which
was
not
possible
in
the
past.
Although
the
A100
is
shown
to
be
a
crowd
attraction
at
equipment
shows,
the
sales
of
this
model
has
been
disappointing.
Victorias
main
competitor
is
the
current
industry
leader,
Washington
Crane
Company
who
is
four
times
larger
in
size
and
holds
50%
of
market
share
of
the
world.
Survey
data
suggest
that
Washington
Crane
offers
superior
service
and
reliability
therefore
is
able
to
charge
a
premium
on
its
cranes
that
are
similar
to
Victoria.
Thus,
in
an
attempt
to
combat
this
Victoria
is
lowering
their
prices
by
reducing
costs
through
backward
integration.
However,
much
of
these
savings
are
negated
because
of
old
and
inefficient
equipment
in
their
Squamish
plant.
Aside
from
this
firm,
Japanese
crane
producer
Toshio
has
been
aggressively
pursuing
sales
worldwide
and
has
recently
entered
the
North
American
market.
The
organizational
structure
of
Victoria
has
been
facing
tremendous
difficulty
due
to
simple
structure
of
management.
This
occurs
when
majority
of
firm
decisions
rely
on
being
made
from
a
centralized
source,
as
a
result
a
tremendous
amount
of
work
piles
up
and
is
not
being
completed.
Between
2001
and
2004
an
attempt
to
fix
this
took
place,
by
setting
up
separate
companies
and
a
corporate
staff
group.
This
new
structure
caused
an
overlap
in
powers
and
resulted
in
many
political
and
factional
disputes
between
line
managers
and
staff
VPs.
The
second
attempt
and
current
organizational
structure
has
been
put
into
place
by
establishing
an
executive
committee;
moreover
this
new
structure
also
involves
establishing
cost
and
profit
centers
for
measurement
purposes.
This
again
has
caused
a
problem
between
the
two
groups
on
issues
such
as
budgeting
and
allocation,
resulting
in
political
wars
and
dissatisfied
employees.
3
Symptoms Customers buying similar products from Washington at a higher price Cost of sales increasing at a greater rate than actual sales Lack of growth for the business in the worldwide market Two re-organizations in the last two years Scheduling and production problems High-turn employee turnover Dissatisfied employees Lack of confidence in leadership Increasing competitors from the Japanese market Failure of new product line (A-100) Problem Statement How can Victoria design strategies to increase the overall synergies within their operations while accomplishing their goal of increasing worldwide market share?
Porters Crane industry The Porters Five Forces analysis provides insight into areas of strengths and weakness for Victoria. Both the Threat of Intense Rivalry and the Threat of Substitute Products are high. With so many competitions entering the already dominated industry, Victoria will need to differentiate itself and focus on their strengths of product innovation, knowledge and flexibility to stimulate consumer demand. They will need to emphasize production efficiencies and process engineering to lower manufacturing costs and continue expanding into global markets. Another alternative may be for Victoria to exit the business or implement a joint venture or merger with the new firms. Victoria could expand by negotiating win-win deals for all distributors overseas and find the right partners with compatible goals and values to create valuable relationships. Information systems must be designed and integrated to facilitate communication with potential suppliers/distributors. Victoria will also need to look at their internal structure and emphasize and review their service and reliability with the competition. SWOT Victoria has adopted a cost leader strategy in the mobile cranes industry, it has done this through extensive backward integration, but most of its cost advantages are negated by inefficient and old equipment from their Squamish plant. An opportunity in improvement can be seen if new equipment is purchased and these cost savings are able to materialize on the income statement. Victoria provides the industry with a differentiated product that no other firm is currently doing building on this they might be able to establish a larger product line. Victorias cranes also lack in product marketing, there maybe potential for increase in sales through the proper means. Victories weak organizational structure has led to many dissatisfied employees and high staff turns-over. Employees at Victoria feel that there is a lack of strong leadership and clear direction. This can translate to an opportunity for members of the organization to step up and assume this role. Value chain
An internal analysis documented on the value chain activities of Victoria Heavy Equipment Limited identified problems caused by the restructuring of general administration. The decision to restructure the organizational structure from a centralized to decentralized system has created a sense of panic and lack of harmony within the company. Therefore, the firms primary objective should be to develop and maintain a cohesive staff and management in order to obtain a sustainable competitive advantage among its competitors. Industry life cycle Through our analysis it was determined that the mobile crane industry is in the maturity to decline stage of the industry life cycle. Differentiation and overall cost leadership strategies are among the generic strategies adopted by Victoria. The segmentation consists of custom-made cranes and standard cranes. Major functional are of concern points towards general management and finance, with emphasis being on Organizational structure. Due to low growth in this Industry, market leaders are defending their market share and extending product life cycles with introduction of new products lines.
Alternative
1
Differentiating
Victoria
Heavy
Cranes
from
the
competitors
through
custom
built
cranes
by
improving
in
facilities,
cost
reduction,
corporate
structure,
marketing
and
customer
service.
Victoria
Heavy
Equipment
is
presently
the
worlds
second
largest
producer
of
mobile
cranes.
By
continuing
their
vision
of
quality
products,
professional
employees
and
a
high
standard
of
excellence
Victoria
can
sustain
competitive
advantage
in
the
new
environment
with
a
few
modifications.
Victoria
offers
its
customers,
custom
made
mobile
cranes
with
options
of
precision
lifting
capabilities,
fast
highway
travel
and
effortless
city
driving.
By
focusing
on
custom
manufacturing
of
mobile
machinery
and
creating
new
innovated
products/component
from
their
in-house
manufacturing
plant,
Victoria
can
achieve
it
goal
of
achieving
growth
in
the
world
market.
Expansion:
They
can
expand
their
manufacturing
plant
to
design
new
components
for
other
industries
as
they
have
the
experience
and
capability.
They
have
already
done
something
similar
in
2007
when
they
opened
the
California
plant
and
doubled
sales
to
150 million. This expansion would further enhance value and increase their R& D research giving them an edge on leading technologies. Utilizing their in-house manufacturing plant: With a sixty percent share in Canada, Victoria seems to have gained some loyalty from the Canadian market. They could capitalize on marketing to contractors, who are the primary consumers in the mobile carne industry this can be done by emphasizing on their dependability as well as there in-house parts and service availability. Expanding relationships with Dealerships and outlets: The competition currently has over 100 strong dealers worldwide and 200 outlets. Victoria could expand their partnerships with dealerships and promote their differentiated products as well as their in-house manufacturing plant. Victoria could also pioneer themselves as the first Canadas company to develop commercially successful hydraulics crane controls, emphasizing smooth hydraulics. New Technology Equipment: Victoria should increase investments in of technology and new equipment in order to increase efficiency. Moreover, this will also allow them fully capitalize on its Squamish plant that is currently eating away at cost savings that backward integration has provided them with. Strategy controls: With the President Brian Walters retirement and poor organizational structure has made employees at victoria to lose focus and has created dissatisfaction among many of its employees. In response to this, Victoria needs to restructure, clearly defining organization roles and responsibilities and find a strong leader that will be able to uplift the companys morale. Cost reductions and Customer Service: Create a lean manufacturing production process and work closely with engineers to refine existing procedures. Victoria can also put more emphasis on their after market service. They could follow up with customers to obtain feedback, and work to improve in areas that they lack. Marketing:
Victoria will need to increase marketing towards contractors, as Victoria does not do any marketing aside from trade shows. Value Chain Analysis Victoria has several current dealerships but to keep competitive, they will need to create valuable relationships with. By sourcing new low-cost material leveraging the machine-driven processing and closely working with engineers to refine existing products, Victoria will be able to reduce production expenditures. To further enhance value, Victoria could focus on production of machine-made parts and capital-intensive products and try to sell their components to other manufacturing companies. The outbound and inbound logistics from the Value Chain indicates opportunities for further exporting with extra inventory and established exports chains. As Victoria currently exports to 30 countries, they have the ability to increase exporting and enter new markets. Porters Five Forces Analysis Manufacturing Industry Porters Five Forces Analysis provided insight into areas of strength for Victoria, and where they may face threats. Both the threat of intense rivalry and the threat of substitute products are high for Victoria as there are competitors entering from the Japanese market. Victoria needs to differentiate within the industry and focus on what they know and promote which stands to be custom made cranes. Victoria can use insights provided by the Five Forces to create higher entry barriers that discourage new rivals from competing with them. Victoria could promote quality unique designs and utilize in house materials while using technology to assist with pieces that are standard design. Victoria could differentiate by improving products, services and implementing new strategic marketing plans. As noted in the analysis customers value reliability and service over price. According to the Potters Five Forces Analysis, the Bargaining Power of Buyers is medium therefore Victoria needs to differentiate itself from competitors to retain its current
clients and attract new ones. Victoria should develop strong relationships with their distribution channels in order to better balance the bargaining power of their buyers The implementation of this strategy would provide an immense amount of positive effects for Victoria such as 1. An increase in market share 2. An increase in revenue and cash liquidity 3. A competitive advantage over competing firms 4. The reduction in cost from economies of scale through new manufacturing machinery.
Alternative
2
Sell
Victoria
Heavy
Equipment
Company
There
has
been
much
international
competition
entering
the
US
and
Canada
from
countries
like
Japan
where
labour
costs
are
cheaper
and
the
market
pool
of
highly
qualified
skilled
engineers
is
greater.
Their
has
been
little
growth
in
the
international
industry
since
2002
and
economic
conditions
will
continue
to
worsen
due
to
the
2008
subprime
mortgage
crisis
which
can
potentially
destroy
the
company
or
greatly
hinder
it
to
the
point
that
it
may
never
recover.
Furthermore,
there
does
not
seem
to
be
any
desire
for
Walter
to
continues
to
lead
his
organization.
He
has
made
this
clear
by
his
semi-retirement
and
current
action
of
stepping
down
and
appointing
an
Interim
CEO.
Victoria
needs
to
sell
now
and
exit
the
industry
while
it
still
can.
As
the
company
is
currently
profitable
and
can
offer
strengths
to
those
larger
corporations
who
wish
to
acquire
Victoria.
PESTI
The
industry
has
reached
market
cap
potential
as
indicated
by
the
fact
that
since
2002
the
crane
industry
has
not
shown
any
growth.
The
economic
environment
is
continually
seeing
a
decline
especially
with
the
on
coming
2008
subprime
mortgage
crisis
which
will
potentially
hurt
the
firm
some
more.
Contractors
are
also
showing
brand
loyalty
to
a
firm
that
is
four
times
the
size
of
Victoria;
they
see
value
of
superior
service
and
reliability.
This
is
another
factor
that
is
not in control of Victoria, it must harvest customers that already show preference in brand. This sort of brand loyalty is built through reputation, which can take a lifetime to build, if it hasnt built this in ninety years of being the business, what is the probability it will be able to do this in the next twenty or thirty years? Value Chain and Industry life cycle The mobile crane industry is in the maturity to decline stage, with a differentiation and cost leadership strategy. Victoria is implementing this generic strategy by differentiating through custom-made cranes and reducing costs through extensive backward integration. The market growth rate has been low for the past five years and has only two segments, standard and custom made cranes. Currently, the major functional concern of the internal aspect of the organization is the general management such as defining roles of each staff member in the organization and finding a strong leader. The current objective seems to be to defend market share from the likes of Washington and current aggressive Japanese competitors like Toshio. Management also wishes to introduce new product lines, and it has with the newly innovative T1000, which has seen to be a failure. The Value chain indicates new technology is required to sustain competitive advantage; this is very costly and doesnt guarantee success. Also the lack of synergies between departments has negatively affected Victorias operation.
Implementation
Alternative
1:
Differentiating
Victoria
Heavy
Cranes
from
the
competitors
through
custom
built
cranes
by
improving
in
facilities,
cost
reduction,
corporate
structure,
marketing
and
customer
service.
Investment
in
Equipment
and
or
Production
Facility
Implementation
Time:
3-6
months
Step
1
After
a
New
president
has
been
recruited,
Victoria
will
need
to
have
a
managerial
meeting
to
discuss
the
new
strategies.
They
will
also
make
plans
to
upgrade
equipment
and
decide
whether
to
purchase
a
production
facility,
or
construct
a
new
one.
10
Step 2 With re-organization, a company meeting will be to be established to create unity once again. The different divisions will need to have structured formal meeting and cross relationships with the other departments to create synergies within. Create new targets and operating targets (sales quotas, customer satisfaction scores, operating budget, production schedules) Organization must employ effective strategy control, if they are to successfully develop and implement their strategies. Production and R&D need to meet on a regular basis to create innovated, differentiated products. Regular review projects assign a project leader Develop and Sustain Strong Supplier Relationships by Sales and Marketing Implementation Time: 6-12 months; continuous To sustain a competitive, it is essential that Victoria market and develop strong relationships with their Dealerships and outlets. With exclusive relationships, Victoria can focus on innovated engineering and products as well training and development. Victoria could also market their ability to manufacture other components for other companies using their in-house manufacturing facility. They will need to emphasize production efficiencies and process engineering to lower manufacturing costs and continue expanding into global markets. Step 1 Develop a Management team, which works together to ensure quality performance, accountability, and strengthened relationships with current dealerships. Also strategize on Sales and Marketing processes. Step 2 Evaluate current dealerships to determine which avenues have been successful with obtaining our goals and whom we should pursue next. Step 3 Communicate goals and performance to chosen dealerships and negotiate contract terms Step 4 Meet with dealerships on an ongoing basis for routine check-ins to ensure adequate quality and performance levels are being met. Maintain regular communication; the key to a successful partnership. Align the Organizational culture Implementation Time: Immediate and continuous: With the current re-structuring, the company will need to relook at the internal opportunities/processes. Work with Human Resources to create processes that offer proper balance between culture, rewards and incentives. Implement and action performance measurements, evaluation and feedback (ex based control systems which is based on feedback from peers, customer, suppliers)
11
Establish concrete goals for each employee so everyone knows exactly what is expected and the related time frame. Implement a reward and incentive system The organization culture can be strengthen and sustained by open communication, Which can be cultivated and encouraged. Offer divisional pep talks monthly or quarterly (morning breakfasts) Encourage training and development within and create Best practices. (Training builds culture)
Appendices
Political:
The
case
did
not
talk
much
about
environmental
issues
Economical
Sociocultural
The
primary
consumers
of
mobile
crane
industries
were
contractors
Contractors
very
sensitive
to
down
time
so
the
machine
dependency,
parts
and
service
are
critical
Price
premium
paid
for
superior
service
and
reliability
(Washington
crane)
Technological
Custom
made
cranes
numerous
options
such
as
on-site
performance,
precision
$945
million
world
mobile
crane
market
Victorias
US
market
$360
million
(15%
share
=
$54
million)
Victorias
Canadian
market
$66
million
(60%
share
=
$39.6
million)
Washington
crane
30%
of
crane
market
(30%
of
$66
million
=
19.8)
Little
growth
in
the
crane
markets
since
2002
Washington
crane
is
the
industry
leader
with
sales
of
$600
sales
worldwide
(50%
market
share)
10%
decline
in
world
cranes
sales
expected
in
2008
due
to
US
Subprime
mortgage
crisis
(i) 30%
decline
in
North
American
market
Pestl Analysis
12
lifting capabilities, fast highway travel, and effortless city driving A-100 cranes with 70 ton capacity and lift heights of 61 meters one of its kind in the industry Standard cranes
International
Porters 5 Forces Crane Manufacturing industry Threat of New Entrants (Medium) Economies of scale Victoria has two facilities/plants, one in Squamish and one in Sacramento, California. They also own a distributor plant in the US Victoria needs to update equipment in the Canadian plant. Increasing competition within the Industry currently five large competitors in the Crane business, plus two new international firms entering the industry. Capital requirements Large monetary capital is necessary to enter the market (high overhead for manufacturing) Access to appropriate distribution and marketing channels. Competitors have diversified and have 100 strong dealers worldwide with 200 outlets Victoria should focus efforts on strengthening dealerships and supplier relationships through vertical integration, licensing, etc. Differential Victoria offers product innovation, knowledge and custom design
13
(1) Pioneered the development of the motorized skidders and produced Canadas first commercially successful hydraulic crane controls. They offer numerous options for their cranes such as on-site performance, precision lifting capabilities, fast highway travel and effortless city driving. Victoria offers tailor made cranes to customer specifications and a 60-day delivery guarantee. Victoria is able to offer a price reduction for medium and heavy capacity custom cranes compared to their main competitor Washington. Contractors value machine dependability as well as parts and service availability over price. Several other companies supply the same or similar products. Some competitors offer better service than Victoria. Victoria offers a unique opportunity for prospective buyers to be flown in on the companys private jet to the production plants to see the progress.
The analysis shows product differential opportunities and excellent efficiencies of timelines of delivery. Threat of Substitute Products (High) Many competitors who offer substitutes are entering the market, such as Toshio and Sata from Japan. Washington Crane occupies 50% of the US market share and 30% of the Canadian market. Each of these companies could offer various substitutes. To reduce the threat Victoria could focus on their current products flexibility, custom design and efficiency for developing new cranes. Combining multiple strategies gives Victoria a more competitive advantage. Victoria can offer differentiation and overall cost leadership. Bargaining Power of Buyers (Medium) Contractors are very sensitive to machine dependability as well as parts and service availability. Price is important but not the main deciding factor. Victoria created specific agreements with the buyer/dealers to purchase 10 at a time
14
Some of the products in the industry are standard or undifferentiated. Agreements are arranged with the buyers Victoria acts as their own buyer (forward integration) as they purchased a dealership in the US to maintain power. Bargaining Power of Suppliers (Low) Machine dependability and service are crucial to the contractors The supplier of raw materials are easily substituted, Victoria can purchase small parts from different suppliers, as there is a standard in metals, nuts and bolts. Victoria manufactures 85% of its crane components in-house backward integration The Intensity of Rivalry Among Competitors in an Industry (High) There are many competitors in this industry, which increases rivalry. The intensity will only become greater once international companies/players enter the Canadian market - two companies from Japan entered in the US. The buyers choice between companies is typically based on dependability and service.
SWOT
STRENGTH
Cost
Leader
In
Custom
Cranes
Backward
integration
Differentiated
product
Worlds
second
largest
produce
WEAKNESSS
Organizational
structure
Old/Inefficient
Equipment
Decentralization
Growth
Strategy
Leadership
Staff
Turnover
Marketing
THREAT
Number
one
on
Washington
capital
hit
list
Japanese
competitors
expansion
2008
subprime
mortgage
crisis
Employees
demotivated
15
Industry
life
cycle
Crane
industry
Maturity
to
Decline
Generic
strategy
Differentiation
overall
cost
leadership
Custom
made
cranes
Overall
cost
leader
(lowest
cost)
Market
Growth
rate
Low
Segments
Two
Custom
crane
and
standard
Emphasis
on
process
design
Low
Major
functional
area
of
concern
General
management
and
finance
Organizational
structure
o Victoria
does
this
by
the
establishment
of
two
cost
centers
for
measurement
purposes
Overall
objective:
Defend
market
share
and
extend
product
cycle
Defend
market
share
from
competitors
o Victoria
does
this
by
defending
against
Washington
Crane
and
Toshio
Management
planning
to
introduce
new
product
lines
Value
Chain
Analysis
Inbound
logistics
Decentralized
inbound
materials
and
parts
Scheduling
of
raw
materials
and
part
for
made
to
order
crane
Large
inventory
management
for
LMT1000
crane
Operations:
Accept
order
of
10
cranes
or
less
LMT1000
not
built
to
stock
due
to
numerous
choices
Sacramento
plant
produced
60
to
70
cranes
per
year
Canadian
plant
produced
130
to
150
cranes
per
year
Extensive
backward
integration
to
reduce
price
85%
of
its
crane
component
manufactured
in
house
Decentralized
manufacturing
activities
16
Engineering response to manufacturing was slow and poorly coordinated Outbound logistics The company guaranteed 60-day delivery and tailor-made cranes to customer specification Sacramento plant exported to US market Squamish plant catered Canadian Market 30% Exports Shipments to dealerships/outlets Marketing & Sales A-100 a very crowd attraction device at equipment shows The firm carried out little conventional advertising It participated frequently at equipment trade show Fly prospective customers from all over the world in Executive jet Due to subprime mortgages in U.S and the subsequent decline in real estate and construction there was a decline in Victorias sale. International marketing cost centre Services Fly prospective customers from all over the world in Executive jet General Administration Centralized decision making process Middle managers lacked development Lack of central control over spending resulted in over expenditures The view of staff and the operating companies presidents varied considerably when they discussed Victorias organizational evolution and the operation of the president structure Walters reorganized the firm by setting up separate operating companies and a corporate staff group. o civil war in the company Politics and factional disputes were the rule rather than the exception o Manufacturing and marketing staff function were eradicated with organizational restructuring o An executive tea, was established in 2006 which included the president and head of al staff groups and general managers of all 4 division o Executive committee held monthly meeting to discuss about profit and cost problems, handle mutual problems. o Subcommittees handled subjects such as research and development and new product Procurement Decentralized procurement Large inventory for raw material and parts procured for LMT1000 products
17
Human resource Fired 13 15 people after forward integration The engineering group has a high turnover rate with 4 VPs leaving since 2005 Decentralized operating company structure gave each person the opportunity to grow and develop without hindrance of other functional executives Centralized human resource department 75 shop floor employees were laid off at Squamish Worker moral suffered as a result of layoffs and profit sharing plan Shop floor workers and the supervisory staff were disgruntled along with central and divisional staff group Technological Built a crane larger than average height and lifting capacity Centralized R&D department New product introduced A-100 (it had a 70 ton capacity and lift loads to height if 61 metres. New to upgrade equipment
18