Professional Documents
Culture Documents
BUSI 690
Baldwin
October 2, 2010
“We certify that we are the authors of this “paper” and that any assistance we received in its
preparation is fully acknowledged and disclosed in the Annotated Bibliography section of the
paper. Specifically, we have cited any source from which we used data, ideas or words, either
James C. Murphy
Eduardo A. Paiva
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2.1.1 Qualitatively
Our company’s current generic strategy is broad differentiation. In the sensor industry,
customers’ needs vary according to the five market segments: traditional, low end, high end,
performance and size. In accordance with our strategy, our company seeks to maintain at least
one product in each segment to satisfy the diverse customer preferences. We strive to keep each
product unique, tailored to its segment’s customer buying criteria. Thus, we seek a competitive
advantage by primarily having products with superior attributes. In order to accomplish our
strategy, we have sought to improve our business’s value chain activities. Specifically, we
invested aggressively in TQM initiatives that have significantly enhanced our R&D cycle time;
in 2014 we invested $2,000,000 in concurrent engineering and our R&D cycle time has
ways. First, by having the best R&D department in the industry, our products have excellent
designs; Bid and Buddy have one of the highest MTBF ratings in their respected segments.
Second, we aggressively seek to position our products at their ideal location each year. This
entails making necessary improvements to each product’s performance and size. Finally, we are
striving to have excellent awareness and accessibility for our products. Although we are still
working on building up our awareness and accessibility, the goal is to be above 90% in both
categories in four years. We want customers to know about our great products and have a
able to charge a premium price for our products. Customers are willing to pay a higher price
because our products are unique and well positioned within their respected segments. Our higher
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prices enable us not only to cover our costs, but to obtain attractive profits. This is important in
satisfying our stockholders and having a higher return on equity. In addition, we have sought to
control costs by competitively expanding our products’ capacity and automation. In fulfilling
this objective, we have been able to lower labor costs, turnover, and achieve higher worker
productivity. Finally, we have invested in recruitment and training to attract and keep high
quality employees. Here at Baldwin company, we understand that perhaps the best way to
differentiate ourselves is with our people. Therefore, we will always seek to have the most
talented, bright and motivated employees within the industry. In short, our vision is premium
products for all segments in the industry, while doing what is in the best interest of our
2.1.2 Quantitatively
Sales growth is well above the total sensor market growth, which ranges from 9-20 %
annually. The 37% increase in sales from 2013 to 2014 was striking since we also increased our
market share. This is an extraordinary feat since we managed to increase sales at a higher
percentage than our competitors while only introducing one new product during this timeframe.
Equally impressive is our ability to maintain a steady contribution margin amid lower prices and
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fierce competition. Consequently, the results have been continuous improvements to our net
The outcome of our favorable margins has translated into strong balance sheet positions,
especially Return on Assets (ROA). ROA for year 2013 and 2014 are well ahead of our
forecasts for increased product demand developed. The timing of these investments reflects in
higher than average ROA as compared with our competitors. Furthermore, the current ratio and
days of working capital measures are higher or comparable with the sensor industry, reflecting a
Return on Equity (ROE) and share price are clear indications we have rewarded our
investors. ROE increased in 2013 and 2014 by 16% and 20% respectively indicating our
vigorous performance. Moreover, due to our performance we have had a higher per share value
year after year on our stocks. In summary, the goal of our company is to continue to succeed in
Well-executed strategy: We have experienced increasing profits the last four years and we
anticipate to continue this trend. We have a product in all segments and each product is
promotion, sales and production over the next four years will secure our place as an industry
leader.
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Higher product automation: Our highly automated production lines allow us to have fewer
workers and thus reduce labor costs in our operations. Although our company did not have the
highest sales in 2014, we had the highest profits because we did a better job managing our costs.
High Plant utilization: By aggressively working our plant assets, we are better able to manage
our fixed costs. This allows us to achieve higher profits per employee.
Reduced R&D cycle time: Our company has a distinctive competency in reduction of R&D
cycle time. Over a four-year span, we invested in several TQM initiatives, such as Concurrent
Engineering and Quality Function Deployment Effort. We were able to reduce R&D cycle time
by 38% and obtain an industry best by well over 23%. Over the next four years, this distinctive
competency will allow us to be the first-mover in the sensor industry and capture strategically
Strong balance sheet: We have one of the lowest debt-to-equity ratios in the industry.
Consequently, banks are eager to help us expand and our company has the highest bond rating at
BB.
Adequate financial resources: Our company has the resources it needs to continue growing our
business and payoff our loans. In 2014, we had cumulative profit of $31,676,697; over the next
four years, we expect profits to continue between $15-20 million each year.
Higher material costs than key rivals: Our company has not focused on reducing material
costs. We stand at a disadvantage when compared to our key rivals. For example, Andrews
Weaker product accessibility: Our company’s distribution capabilities lag behind key
competitors in four of five segments. A lower accessibility will cause our product’s December
Narrower product line: Three out of the four rivals offer more products than our company. In
the next four years, this could cause a loss in market share.
Lower awareness compared to rivals: Except for the Performance segment, our company lags
behind its key rivals in customer awareness. Each customer that is not aware of our products is a
lost sale.
Market share openings: Company Digby seems to be fading which will allow for greater
market share.
Backwards integration: Our company is considering the opportunity to integrate backward into
controlling our own supplies. This would potentially allow for greater control and leveraging
our products.
Industry growth: The sensor industry is projected to continue growing globally over the next
Product-line expansion: Our company has the opportunity to come out with some new
products. Over the next four years, we will be strategically positioned to introduce at least one
additional product.
Increasing competition from substitute products: In approximately five to seven years, the
power of substitute products will most likely be moderate to strong. The sensor industry’s
attractive growth and profit potential is attracting additional competition from substitutes.
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Fierce competition between sellers: Due to the level of competition between rivals, profit
margins may lessen. A well-executed strategy is the best weapon against this threat.
TQM Initiative
R&D: Due to the new and updated product expectations of the sensor industry, the R&D
department is the key primary activity in our company’s value chain. The price we determine for
our sensors is completely based on how relevant the product meets the customer’s demand for
performance, size, and reliability. Hence, we focus our attention to delivering the most relevant
product in the least amount of cycle time. This tactic allows our company to have elevated
Supply Chain Management: The principal activity where our company is successful in
reducing cost is in the area of inventory management. We forecast the units produced to be less
than 30 days supply in inventory, thus lower inventory carrying costs. The company calculates
with caution as to not stock out and lose sales in the process.
Production: Cost savings in this activity occurs especially in the area of labor rates. The focal
point for labor cost reduction is determined by plant automation, capacity, and complement
level. On plant automation, our company strategy is to have the highest automation (80%
automated) for low end products and 50% to 60% automated for all other products. We plan to
balance plant capacity and employee complement needed with 2nd shift and 1st shift overtime. By
conservatively investing in plant capacity and complement, we are able to achieve higher
profitability per employee and lower costs. These approaches to labor costs allow our labor rate
Distribution / Sales and Marketing: The area of distribution is interrelated with the sales and
marketing activities. In particular, the cost savings are derived by effective expenditures on sales
promotion and sales force elements. The company strategy is to maximize product awareness
without experiencing diminishing returns on the promotion expenditure. Thus the promotion
expenses on average for each of our products are not higher than 1.5 million, the level at which
diminishing returns occur. Likewise, with sales force we strive to maximize customer
accessibility expenditures without experiencing diminishing returns. The sales force expenses on
average for each product is under 2.5 million, below the level of 3 million where diminishing
returns are experienced with one product ($4.5 million for each segment).
TQM: One of the most profitable investments is in reducing our cycle count for new and
Engineering, and CCE/6 Sigma Training, we are able to be a first mover and charge a higher
Consequently, we have increased our productivity level and have an improved turnover rate.
Finance and General Administration: Balancing the debt and equity levels is the key to
reducing interest cost. Our company strategy is to maintain debt-to-equity ratio below 0.5.
Expertise in developing
sensors with increasingly
0.25 7/1.75 8/2 7/1.75 1/.25 4/1
higher performance and
increasingly smaller size
Our competitive strength matrix shows that our company has the largest overall
competitive strength rating and therefore has the strongest competitive position within the sensor
industry. Our company has three primary rivals in the industry, each positioned just behind us in
the overall competitive strength matrix, with Andrews positioned second, Chester in third, and
Erie in fourth. One company in the industry, Digby, is barely competing and cannot be
considered a legitimate rival at this time. The weighted overall strength ratings should be a fairly
accurate representation of the sensor industry, indicated by the strong correlation between the
weighted overall strength ratings and the Capsim adjusted scores for the past two years, 2013 and
2014. Over the past two years, the combined adjusted scores for each company in the industry
were 135 (Andrews), 145 (Baldwin), 101 (Chester), 4 (Digby), and 70 (Erie). These scores
place each company in the exact same competitive position within the industry as our weighted
Our competitive strength matrix show that our key area of competitive strength is our
ability to improve the production processes of sensors. Our investments in TQM have reduced
the R&D cycle times by almost 38%. Our nearest competitor in the industry has only a 13.54%
reduction in R&D cycle times. This is a huge competitive advantage for our company. Another
area of competitive strength is in developing sensors with increasingly higher performance and
increasingly smaller size. Our strategy is to position all of our product at the most ideal level of
performance and size within each segment. Our reduced cycle times allow us to do this with
Our competitive strength matrix also shows the areas where our company needs to
improve in order to remain competitive within the industry. Our company has not focused on
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lowering the cost of product design and engineering and therefore trails each of our rivals in the
industry. Our company also trails each of its rivals in product awareness and accessibility.
• Can Baldwin maintain its position as the strongest competitor? Yes Baldwin can, as
long as we remain true to our strategy to reduce R&D cycle times, reduce costs through
careful inventory management, and continually produce products that are well-positioned in
• Are any rivals poised to take away Baldwin’s position as the strongest competitor?
Andrews is best positioned to challenge us as the strongest competitor because they have a
broader product selection than us while remaining competitively close in most other key
success factors. However, it will be difficult for them to suitably position all of their
products in each segment since they need to apportion their R&D expenditures among a
larger product line, and they also have much greater R&D cycle times than we do. If
Baldwin maintains it’s current strategy, we should be well positioned to maintain our
• What steps should Baldwin take to ensure it remains the strongest competitor? In
order to ensure our long-term competitive position, Baldwin needs to lower the cost of
product design and engineering, and raise the levels of awareness and accessibility, while
maintaining other areas of competitive advantage. Baldwin should also introduce one or
more new products over the next four years in order to compete with rivals that currently
offer more products. Baldwin must also regularly re-evaluate its weighted competitive
strength matrix so that it is best able to design wise offensive strategies to exploit its rivals’
competitive weaknesses and design effective defensive strategies to curtail its vulnerabilities.
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Annotated References
1. www.capsim.com website provided specific information on the sensor industry and how to
best implement our strategy of broad differentiation based off of the results from 2014, and
provided the specific results for backing up the reasoning in each category of the SWOT
analysis. The website also provided the figures for the quantitative analysis (Section 2.1.2).
Lastly, the website provided information for each company’s labor cost reductions, R&D Cycle
Time reductions, and overall production information so that we could complete the weighted
2. Crafting and Executing Strategy, Text and Readings by Thompson, Strickland, and Gamble
provided the framework for our broad differentiation strategy. Specifically, the text gave us the
differentiation themes, differentiation attributes along the value chain, and the best routes to
achieve competitive advantage with broad differentiation. The text also summarized each
category of SWOT analysis and described what to look for in assessing our company’s strengths,
weaknesses, opportunities, and threats. The text provided the graph for the value chain diagram
and provided a methodology for creating and interpreting a weighted competitive strength
matrix.