Professional Documents
Culture Documents
of AFE( Americas-Far East ) of Computervision Corporation (CV). y He was concerned about CV s competition esp. IBM and Fujitsu who were gaining market share at CV s expense. y Jim Berrett, President of CV asked Patrick to prepare a detailed plan for improving CV s penetration of Japanese market because it is the fastest growing in AFE and the largest in AFE organization.
CV
y Headquartered in Bedford, Massachusetts y In 1982
worldwide leader in CAD/Cam turnkey systems which were used in increasing productivity and product quality. y CAD/CAM ( Computer Aided Design / Computer Aided Manufacturing) was one of the core building blocks for CIM( Computer Integrated Manufacturing) y The worldwide mkt for CAD/CAM equipment was forecast to have a growth rate of 30-50% per year.
Company History
y CV was one of the !st entrants into CAD/CAM mkt in
1969. y During 1970s CV grew at an annual compound rate of >50% but by 1982 CV s sales grew only 20% over 1981. y It had a strong position in US and Europe.
Products
y CAD/CAM systems had 3 primary components: hardware, operating system software and application software. y CV s products were known for their quality and reliability. y CV s newest product line was Designer V system.($ 2,00,000- $6,00,000) and also a medium scale system called Designer M series ($1,20,000). y Unlike most of its competitors, CV custom designed mini computer-based hardware for CAD/CAM systems so it was easier and cheaper to develop the software hence the resulting systems were better integrated. y CV also developed a variety of specialized software packages and offered complete spectrum of support services to its customers
International Operations
y In 1972, CV generated little sales volume in Europe, CV
appointed a European sales manager in 1973 who later hired a frenchman Patrick Alias as CV s 1st direct sales representative in Europe. y Alias had master s in electronics and maths and 3 yrs work-ex at a small American company in France and in his 1st yr he performed really well and contributed to CV-Europe s rapid growth in terms of revenues and employees. y In due course of time Alias was promoted VP.
products in Japan. y CV s products were sold through the Computer Controlled Systems (CCS) divisions, one of the 4 sales divisions of TEL. y The director of CCS, Jim Nomura who joined TEL in 1967 had headed TEL s CAD/CAM s sales operation since 1973. y He always handled TEL s relationship with CV personally.
contd.
y The 10-yr relationship between CV and TEL had been
uneven. y The growth of CV in Japan was always slower than that in US and Europe. y Then TEL also started manufacturing and assembling American high-tech products in Japan and entered into joint ventures with other US high-tech companies whereas for CV Tel still remained its exclusive distributor. y Nomura proposed a joint venture with CV but its senior management was unreceptive .
contd.
y CV sold its systems to TEL at 35% below US list price
and Tel sold it Japan at US list price +15% for shipping, tariffs and insurance and discounted CV systems at 030% y Hence CV averaged 53% gross margin on TEL shipments.
CV-Japan (CVJ)
y CVJ , headquartered in Tokyo was the largest within
CV-AFE org. y The CVJ org. recruited more and more people to support TEL s efforts in Japan. y The software dev. Function helped TEL develop special software programs for the Japanese market y A new dept- Product Marketing was introduced in it.
Competition in Japan
y About 25 companies were competing in Japanese CAD/CAM
mkt. y Installed base of CAD/CAM systems in Japan were as follows: CVJ 20% Calma 19% Applicon 15% IBM-J 12% Fujitsu 12% Seiko 11% Others 11% The recent success of IBM and Fujitsu in the Japanese CAD/CAM mkt. increased worldwide competition for this fast growing mkt.
contd.
y 2. In Japan top 10 companies controlled 90% of the
industry. y 3. The revenue/employer ratio for most industries was much higher than in US because of extensive use of sub-contractors and due to reliance on closely aligned trading companies to mkt their products. y 4. Cost of capital, ROI and rates of profitability were lower than in US.
Current Situation
y Alias s summary of the current situation:
- since the last 10 yrs CV s competitors were only US CAD/CAM companies but now it faces increasing competition from CAD/CAM suppliers in Japan. - Also Japanese are moving into US & Europe mkts which has been CV s stronghold so the solution is to rapidly expand share in Japan to limit the competition within Japan. - Also before doing so there should be a thorough research of CAD/CAM mkt in Japan and all the strategic options should be explored.
Market Forecast
y In March 1983, Alias had requested the mkt. dept. of
CVJ to forecast the growth of the CAD/CAM mkt in JAPAN and also requested TEL to develop a separate forecast. CV s goal TEL s forecast 1983 9% 9% 1984 16% 8% 1985 23% 8% 1986 30% 8%
Options
y 1.Alias felt that a direct sales force like that in US and
Europe would be the most effective and cost-efficient way of dealing with Japanese competition but was not sure how much transferable that option would be in Japan. y The problems included hiring and training a sales representative which would have been time consuming , hiring supervision, administration and managers and the fact that it was highly difficult for us companies to hire Japanese nationals.
contd.
y TEL was a fast-growing company that had earned the
respect of its competitors and confidence of its customers. y Alias wanted to rapidly expand the work force while Nomura s response was that TEL developed its people internally by hiring the best university under-grads. y Nomura responded by proposing the long overdue joint venture between CV and TEL or that CV should take full responsibility for servicing and supporting our installed base of systems.
contd.
y The idea of a joint venture was opposed by Jim Berrett
and the other senior management at CV because Japanese management would have a stronger allegiance towards the Japanese half owner and also the fact that Japanese companies tended to stop needing their American partner after a few years. y 2. Alias also considered supplementing TEL s marketing efforts with additional distributors, sales rep. or CV s own sales force. But this would not be tolerated by TEL
contd.
y 3. Alias considered other distributors but they wanted
exclusivity thereby replacing TEL and did not have a strong foothold in Tokyo. y 4. Enter into multiple distribution arrangements with 2 big trading companies- Toyota and Sony which did not have the necessary expertise. But Alias was confident that an agreement could be worked out with them because members of large industry groups always bought the best products available.
contd.
y Patrick Alias knew that he had to consider every aspect
so as to achieve a 30% share of mkt. in Japan by 1986 which was vital to CV s global strategy ; on the other hand he also had to keep in mind TEL s long-standing relationship with CV which might get affected.