You are on page 1of 10

1

08108061
GROWTH OF SONA KOYO STEERING SYSTEM LIMITED

Problem Statement:
How to make comprehensive evaluation of Sona Koyos competitiveness? What are the factors
and strategic initiatives for competitiveness? How company can enhance competitiveness for
global expansion to business. What is companys future business strategy and business plan?
Sona Koyo wants to formulate future business strategy. Strategy formulations have three stages:
1. Strategic Analysis
2. Strategic choice
3. Strategic Implementation
Strategic Analysis:
Strategic Analysis model ( Exhibit 1) have been made to make comprehensive analysis of
previous strategic analysis start from mission and vision of company, shareholder concern, and at
different type of company and industry analysis. Sona Koyo has successfully achieved its
previous mission and vision. Sona Koyo have highest market share 50% in volume terms and
35% in value. It is market leader in steering business still from its inception company
successfully in operation excellence like installment of Toyota production system, just in time,
Judoka and Kanban. Company diversity its customer as well as product portfolio diversity
investment risk. Company is making strategic alliance with suppliers and buyers. Shareholders
expectations are very high as company strong financial position and above average industry
return. Even high return to its parent company in order to environmental, corporate and position
order. I have made different model for each type of analysis just to make detailed information
each type of company detail of each type of model is shown in exhibits from 1 to 7. In
summarize all of our analysis. I come to this conclusion that general to specific environment is in
favored of firm. Company has very strong competitive position in industry but still there is a
room for improvement. As shown in exhibit 5 and exhibit 6of case company is adding value at
each stage of value chain and making value added investment to get high returns and try to
2
08108061
diversify business portfolio to make reputation in international market for further detail go to
exhibit 2 to 7.
Strategic Choice:
In this stage, company formulates new strategy for future on basis of strategic analysis results. I
have successfully done strategic analysis portion now I move to strategic formulation stage. On
the basis of strategic analysis option for Sona Koyo is growth. Dr. Surinder Kapur, the
companys founder and chairman want to expand worldwide through collaboration with
multinational market reputation for quality and low cost product. Company has strong financial
position and multinational location so want to compete with world automotive market leaders.
Business expansion or growth help Sona Koyo to achieve the benefits of economies of scale, to
enhance its position in industry vis--vis its competitors and to provide more opportunities for
professional development and advancement of its employees. Growth will be achieved internally
by market penetration, market development and product development. External growth comes
from merger with multinational firms. I will discuss it in detail in future business plan.
Strategy Formulation:
In order to find factor and strategic initiative for competitiveness I have to use discovering core
competences model for new sources of competitiveness, merger and building relevant
competitive assets and process. Discovering core competencies model have shown in exhibit 10.
Company has all type of resources financial, physical, human, technological capital and efficient
management system which are source of competitiveness. Resources make the Sona Koyo
capable to equipped with people management system, knowledge management and expert top
management so bundling of skills and technology that enable company to satisfy their customer
in the core competency of the company. In this way high quality, low cost and human capital is
the strategic competitiveness. All this leads to competitive advantage through above average
industry returns. In this way we are able to identify source of competitiveness. Now we use these
resources of competitiveness for making future business strategy. In order to formulate future
business strategy, I have used resource base view shown in exhibit 9. I have already discuss core
competency model to find out core competency on the basis of these I will formulate new
strategy for Sona Koyo is to expand business by becoming the part of the Koyos global
3
08108061
resourcing organization for passenger car business worldwide. This is only make the company
enables to get superior returns. Now we move to business plan and implementation of strategic
initiatives.
Business plan and Decision criteria:
Dr. Surinder Kapur emphasized that exports going to be the most important growth drivers for
the company. Sona was targeting exports to reach US$22.86 million by 2007. Company has to
grow both by internally as well as externally. Sona should focus on export rather than panic
about mergers. Company has to develop plants locally for exports orientation. It has to invest
75% of total investment in new project over passenger car segment. It can be clearly indicated
that market trend in this segment is growth every year especially in medium cars from exhibit 12
of the case. While in case of merger company have to invest 25% of total investment in new
projects over in heavy commercial vehicles due their growth trend displayed in exhibit 15
(Outlook for utility vehicle sales). Investment is not a big issue for company. Sonas Koyo
present financial trends are very strong. We can produce financial ratio to check company
performance here are some rations such as current ratio is 1.8 times which shows the company
have strong ability to pay its maturing obligations, assets turnover is 3.4 times, inventory
turnover is 30 times indicate efficient use of assets to generate revenue. Debt to equity ratio is
0.32% predicts that low risk in terms of debt when case of low profitability or cash flow
problems, return on equity 11.65%, net profit margin is 7.55% indicated high return over sales
and capital assets. So it is clearly predicated that firms have good performance and status. Its a
public limited company, can issue new equity to raise capital in case of any investment
initiatives. I have make an intervention plans for new strategic initiatives shown in figure 11 as
target of change. Company has to intervene strategic, techno structural, human resource
management and human process for business expansion for export and merger.
Strategic Implementation:
Recommendations:
In case of strategic intervention, Sona Koyo does not have to panic about globalization strategy
because international market is in stagnant stage. Most of international players interring Indian
economy due to growth option, economies of scale, cost and labor so instead of get intensive just
4
08108061
to make merger with multinational player. Company has just invested just like in case of Fuji
Autotech. Company has to influence spouse companies by their competitive advantage of human
capital expertise to make partner company quality and cost efficient company. Company have to
major emphasis on export by development of local unit just Chennai. company have many
advantages in this case like developed market , market reputation, low labor and material cost
export doom , experienced human resource and economics of experience . Company actual profit
is less than expect so still is room for improvement. In this transportation change, company has
gone for product innovation heavy investment in R&D.
Technostructural interventions lead to restricting of Sonas Koyo. For restructuring company
have strongly co-ordinate between departments and remove department barrier. Employee
involvement programs have to initiate for division of work force and its leads to increase their
skill variety, task identity, task significance, autonomy and feedback. Company has to invest in
new manufacturing technology to compete with world leader. Company has to developed an
international subsidiary who will coordinate with local and multinational department as well as
multinational partners.
Human process interventions have to face diversity issues at individual, group and organizational
level. In order to resolve issue of diversity company have educate the employees about cross
cultural diversity communication, decision making and leadership. All of these trainings will
effectively enhance the human process intervention. When we effective resolve the conflicts and
create the climate of trust through developing hierarchies at each level and open dialogue system
will effectively enhance the satisfaction and performance of employees and organization.
When we come to human resource manage intervention we have to face performance issues at
each level either individual or firm level. We have set target at each level. In order to achieve
targets we to recruit people multinational assignments and make management by object
programs.
We have to properly developed source card and dash boards for performance management
system. We have to implement rewards and recognition to employees who meet timely
assignments and actively participate in resolving issues. This will do by profit sharing and
employee ownership programs. We have to identify people who need to trained and developed
5
08108061
just as company done by employees exchange program with koyo Seiko. All this ultimately leads
to increase productivity probability of company. Developed career ladders for succession and
generate planning so that confidence over employment and make their best efforts.























6
08108061
Exhibit 1 Strategic Analysis

Exhibit 2 PEST Analysis

7
08108061
Exhibit 3 Porter 5 forces

Exhibit 4 SWOT Analysis

8
08108061

Exhibit 5 Gap Analysis

Exhibit 6 Value Chain Analysis

Exhibit 7 Portfolio Analysis

9
08108061
Exhibit 8 Strategic Choice











Exhibit 9 Strategy Formulation












Resource Base Model

Resources: Strong financial position (Exhibit 15), Multinational location, Experience
professionals, Latest technology like TPS, JIT, ERP , Large product portfolio, Different type of
cooperation with firms like Koyo Keiko and Fuji Autotech

Capabilities: People management practices, Knowledge management, Market leader and
Expert top management, Alliance with multinational firms

Core Competence: High quality and Low cost producer, Expert human resource

Strategy Formulation/ Implementation: Expand business by becoming a part of
the Koyos Global sourcing organization for passenger car business worldwide. Bundle of
skills & technology that enable Sona Koyo to provide high quality and low cost product to
customers

Superior Return: Above industry average returns like high EOIC, NPM & OPM



Corporate Strategic Choice

Choice:
Growth Strategy
Company wants to expand worldwide
Evaluation:
Shareholders want to expand their business
Compete with world automotive leader
Have strong financial position and reputation



10
08108061
Exhibit 10 Discovering Core Competencies








Exhibit 11Target of change


Strategic Intervention
Competitive & Collaborative Strategies,
Organizational Transformation

Issues
Alliance and Network with multinational players, Global
competitive strategy, Market and product development

HRM Intervention
Performance
Management,
Training and
Development
Issues
Division of work force,
Coordination of
department,
Production
Technology, Job
Characteristic
Techno-structural
Intervention
Sonas Restructuring,
Employee involvement,
Work design

Issues
Target Competent
People, Set goals
and targets,
Career planning &
Development
Human Process Intervention
Individual, Group& Organizational process
Intervention

Issues
Diversity Issues related to communication, Decision
making, Leadership & Interaction
Resources: Strong financial position, Multinational location, Experience
professionals, TPS, JIT, ERP& Large product portfolio


Competitive Advantage: Above industry EOIC, NPM & OPM

Strategic Competitiveness: High Quality & low cost

Core Competence: Bundle of skills & technology that enable Sona Koyo to
provide high quality and low cost product to customers

Capabilities: People management practices, Knowledge management,
Market leader and Expert top management