The setting up of operational systems is important part of entrepreneurial venture in which adaptability is crucial to the entrepreneur. Strategic actions need a lot of organizational review as well as well as accurate understanding of the business environment. This principle would be more effective and objective if applied and guided with technical attributes, principles and knowledge in dealing with situations and forces of the marketplace.
An example of such is the buyout of a corporation by a new merging company, the adaptability stage phases in to the hierarchy of business—its past, present and future conditions—in the realms of inherited success or failure—the new owners and incorporators will make the necessary modification, alteration, product innovations consistent with the market and industry trends.
The discussion on this paper focuses on the case of Able Corporation, which has been sold to the Walden Company. The dilemma of the new owner is attributed by the untimely takeover to the business during an economic recession. Apparently, the current market and industry trend suggests the need of extensive studies—as the leading competitor has a captive market for a copied brand—relevant to the organizational and financial well being of the corporation. Otherwise, the buy out of Able Corporation could be in futility and may resort to summary retrenchment of employees.
The hiring of Able Corporation’s Director of Strategic Planning and Analysis could be beneficial, in which the internal and external challenges may be addressed and resolved towards entrepreneurial gains.
Depictive of the mandate and role of the Able Corporation’s Director of Strategic Planning and Analysis, a three-prong approach would relate the environmental analysis within internal and external perspective of the Able Corporation as an organization through: (1) an organizational review using the work of Robert Comerford’s and Dennis Callaghan’s “Strategic Management” principles as guidelines, (2) a competitor research to determine market positioning, and (3) using the available statistical data as bases of study.
Able Corporation is an old family enterprise being a renowned American manufacturer of portable electric power tools (PEPT). The buyout of the corporation to Walden International, Inc., would lead to the orientation of being profit-driven on short-term financial gains. Currently, there are obsolete product lines of Able Corporation due non-investments to product development together with inefficient and expensive operations adding to net operating losses in two of the last four years of operations.
The corporation has a wide range of power tools that caters to both consumer and industrial market channels. One of its products, the circular saw, gains a market share of 40% as a consumer product. However, products are non-competitive considering the high production costs as attributed by wage increase in unionized labor and outmoded manufacturing plants. Likewise, the corporation has limited information on the market flow, share, size and forces that could determine product costing and positioning. Moreover, the corporation is unable to analyze market performance relating to competition.
Environmental analysis addressing internal factors
According to the works of Comerford and Callaghan (2005), environmental analysis addresses both internal and external factors. From the point of view of the organizational life of Able Corporation, there are similar factors that should be addressed. First is the organizational aspect that needs an urgent attention by the new management and second is the market and industry environment.
Situational and Risk Management
The application of situational and risk management refers to and ideally applies with the ‘inherited ventures,’ be it transferred, purchased and judicially acquired (by family inheritance or heir) ownership, akin to incorporation of a new managing entity. The classification of an inherited venture in an enterprise conveys the character of the former owner to the marketplace. Thus, the degree and status on the success, failure and liabilities is a succession of the newly established proprietorship.
Based on the situations of the Able Corporation, the Walden Company is alarmed of the intense situation that the obsolete manufacturing equipment, unionized workforce and unstable product marketing could adversely affect its profit-driven financial investments. In this regard, the Walden Company would take its stance to calibrate the aspects of operations, with the intent to promote efficiency amongst the workforce coupled with managing the risk of investments to replace the obsolete manufacturing equipment.
The situational and risk management has been considered by Walden Company in view of the assumptions that Able Corporation has its renowned consumer product (circular saw) that contributes about 40% of sales. Considering the fact that the application of risk management is an immediate action and relief to the situation, it would however retain several seasoned workforce that are considered as an organizational assets.
Applying the situational and risk management is a compelling approach underlying the options and considerations of subjective findings to which attributed by the desire to survive the potential profitability (Comerford and Callaghan, 2005), wherein the Walden Company believes in the potential of Able Corporation.
Retrieval of Operations
The hiring of the Director of Strategic Planning and Analysis relates the retrieval of operations. It is on this aspect, the Walden Company has able to seek the necessary and vital role of the Director of Strategic Planning and Analysis to determine and identify operating components that would establish organizational capability translated into creating efficient workforce, innovated product lines and market positioning.
Environmental analysis relating external factors
It is being assumed in this paper that Walden Company, through its Director of Strategic Planning and Analysis, considers the importance of environmental analyses relating the external factors that affects the Able Corporation’s business operation. Based on the organizational review, it was found that the Able Corporation has limited information on the market flow, share, size and forces that could determine product costing and positioning. In this case, to familiarize the competitors is an advantage to determine and identify the market flow, share, size and forces.
The framework of market reconnaissance is a basic approach focusing on the key players of the market and industry. The adverse market situation is a formidable arena that challenges the efficiency and capability of every entrepreneur that measures the degree of success and profitability (Comerford and Callaghan, 2005). Therefore, market reconnaissance is necessary and needed in order to identify the competitors (key players) together with determining the competitiveness.
The Able Corporation, being established in the industry with renowned manufacturing expertise, could identify multinational firms, such as; Bosch (Germany), Black and Decker (United Kingdom), and Makita (Japan) as direct competitors in most of its product lines. These competitors capture both domestic and foreign markets.
According to statistical report, an approximate 3% share to the American domestic market is retained (NAR, 2008). Looking at the forecasted figure, it can be deducted that 97% is the total market share, from which about 30% is absorbed by franchisees and retailers. Thus, about 67% is shared amongst the leading competitors that may be gaining the market share at the assumed equal rate of 22.2%, as the indicator derivative figure of Makita Company (2008).
A quick appraisal on the figure may relate an example, like Makita (being a Japanese conglomerate) invest into export and import, could only gain a gross of 7% over revenue, tariff duties and excise tax expenditures as well as about 2-3 percent cost of hauling and warehousing that could gain a net of 4%. Translating the market share comparative to 3% target of Able Corporation in domestic market would be a substantial gain.
Accounts on Statistical Data
The relationship of acknowledging the information, as political-economic experts follow on the principles of geopolitical or economic intelligence through environmental scanning, statistical data is being considered as the benchmark and metric of analyzing the adverse market environment, performance of the industry and consumer confidence. In this point of view, statistical data measures the response emanating from production and market, distribution of goods, business environment and the policy trends.
Based on the report of the US Bureau of Economic Analysis, it accounted that: (1) economy will avoid recession, (2) business inventory will be drained and there is small increase in production to restock inventory in 2008, (3) business spending remains positive and exports continues to grow, (4) consumer spending will slow down due to loss in housing wealth, and (5) sub-forecast for 2008 is not a recession but a sub GDP par growth rate of 2.2% (Fears, K. and Smith, J., 2008).
This statistical report could be complementing opportunities for Walden Company to plan and venture out developmental investments to strategically phase-in to acquiring materials and equipment while market demand is low and supply is high. Accounting on the statistical data relating to industry performance would provide the guideline to assess the market and industry environment and calibrate Able Corporation’s organizational operation.
The determination and identification of internal and external factors relating to the revitalization of Able Corporation could be more viably undertaken by Walden Company through an extensive conduct of corporate planning that focuses on the initial undertaking of environmental analyses.
One of the advantages of the Able Corporation is its established business within the industry and the marketability of the product lines. However, product innovations would be necessary to enable competitiveness and better product positioning.
The upsurge of American domestic economy is found to be potential despite the eventual recession of the labor market as brought about by the global market trends. This perception is attributed by the household needs to consumer products that is relating to the products of Able Corporation.
What is then relevant to the business orientation of Walden Company, being profit-driven in short financial investments, is its determination to take the risk and survive Able Corporation amidst organizational dilemma. This challenge is then address to the overall organizational structure of Able Corporation where it would converge to the industry and compete for a market share.
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