The paper is all about the case study on Multi-Electronique et Cie. It discusses the strategy chosen by Multi-Electronique et Cie to pursue in its operations. To further analyze its chosen strategy, the Ansoff Matrix is used, with the aid of the SWOT Analysis. The other options available for the Multi-Electronique et Cie is also discussed to evaluate which among the different options available for them is the most advantageous on their part. To end the discussion, the writer gives his personal view about the company’s chosen strategy and presents his personal choice regarding the best-suited strategy among the choices. A brief introduction about the company and the Ansoff Matrix is also discussed to give a background for the reader.
The Multi-Electronique et Cie
In these recent times where stricter competition exists in the business environment, it is a prerequisite for most firms to grow at a certain stage in order to survive in the business world. Therefore, a well-defined scope and growth direction is needed for firms to realize growth. The Multi-Electronique et Cie (ME) is the European market leader in terms of manufacturing high quality aircraft connectors. However, due to the major cutbacks in purchases of the military sector, ME was now suffering from low sales and profits. The worldwide recession, as well as the reductions on the defence program seems to be the foreseeable reason behind this situation. Due to this situation, a thorough evaluation of their present strategy, together with a clearer growth direction is considered necessary for ME’s achievement of its goal of fifteen percent growth yearly.
The Ansoff Matrix
Among the popular matrices used in the identification of the basic alternative strategies for a firm, the Ansoff Matrix is one of them. It provides strategy options for firms who want continued growth. It reduces complexity and provides the company a better knowledge of their product behaviour and market dynamics.
The Ansoff Matrix is a planning aid useful in describing the four possible combinations for products and markets. They are also called the four categories of marketing objectives. They are market penetration (selling of existing products to existing markets/segments), market development (extension of existing products to new markets/segments), product development (development of new products for existing markets/segments), and diversification (development of new products for new markets/segments).
The Pursued Strategy according to the Ansoff Matrix
In order to achieve their goal of fifteen percent growth annually, ME entered into the commercial and industrial sector, regardless of their lack of experience in the said division. In this way, they can boost up their total sales volume. Their strategy is to solve a different need of a totally different customer, and this is the commercial and the industrial market.
By definition, ME had pursued the strategy of diversification, that is achieving their objectives through its entrance into a new market and the introduction of new products. Due to the fact that their objectives are no longer met within their existing product market scope, they have launched a new and totally different set of connectors for the industrial and commercial market.
The connectors used in the commercial and industrial sector seem to be technically the same with the ones used for aircrafts that is why they have chosen to serve these markets. This is called concentric diversification, which is defined as the introduction of new products that is closely related to their current product in the new market. In addition, they also pursued the strategy of technology related concentric diversification. In short, the connectors sold in the commercial and industrial sector is closely related to the ones sold in the aviation market, and there exists a certain kind of similarity between the technologies used in the production of all these three types of connectors.
The term ‘new products’ infers a certain degree of technical innovation, while ‘new market’, on the other hand, presupposes the existence of the element of unfamiliarity in the market situation. The newness factor of the product/market combination, therefore, imposes a certain level of risk for the company that needs to be managed. ME has chosen this alternative despite the fact that this is the riskiest among the said alternatives. This is due to the fact that the synergies such as the production process, and inherent skills within the organization such as the skillful sales force, could be obtained due to the nature of the similarity in the technology used in the production of both types of connectors.
Different signs of the implementation of the diversification strategy is manifested on the actions undertaken by the ME company. First is the change in the company structure. It was first done in the engineering section. New types of projects and design engineers, knowledgeable in commercial connectors, are taken. A new building was also constructed afterwards, to house the new manufacturing plant for all commercial connectors. Next is the division of the sales team into two. This was due to the fact that the task of selling in the commercial sector is a lot different from selling in the aviation sector. Market research is also extended to further improve the forecasting. This is necessary due to the highly cyclical demand pattern of the new connectors in the new market. Finally, price lists for now are maintained to be up-to-date, particularly for the new connectors. This is due to the constantly changing and unique requirements of the customers from the new market, as compared to those in the aviation sector.
The SWOT Analysis
To give us a more comprehensive background about the status and the standing of the company in its market, it is also important for us to examine the company’s internal and external environment. It will assist us in making effective recommendations about marketing strategy, which can be beneficial to certain companies. A SWOT Analysis draws together the external, as well as the internal factors, and provides a basis for the formulation of business strategies. It can be in the matching of the ME’s resources and capabilities to the competitive environment in which it operates. (see appendix A for the ME’s SWOT Analysis)
Other Options according to the Ansoff Matrix
Base on the Ansoff Matrix, with the aid of the SWOT analysis, diversification is only one among the alternatives for ME. The other options for them to consider is the market penetration, market development, and product development.
Market Penetration
This is to increase the sales volume of aviation connectors in the existing market. In market penetration, pricing and promotion for the existing product in the existing market needs to be very competitive. However, due to the fewer unknowns, this strategy is less risky compared to the other options.
There are four possible ways for market penetration. First is to increase the number of users of the aviation connectors, through the attraction of competitor-users or conversion of non-users into users. However, the demand saturation and the fierce competition make it impossible to happen. Second is the increase of purchasing frequency of present users. Again, this is impossible since the frequency of purchases depends on the customers’ true demand, in which ME has no control. Third is the increase in average quantity purchased per transaction. Like the second one, this depends on the customers’ purchasing power in which ME has no control, therefore making it impossible to pursue. Lastly, increase lifetime value to achieve retention of customers. This option is useful for ME, only if it would improve its customer service through the development of the full range use of marketing mix such as aggressive promotions and on time door-to-door delivery.
Product Development
This involves the modification of existing products as a way of improving its quality, style or any characteristics valued by the customers. Due to the possibility of failure for the new products and the element of the unknown associated with this type of strategy, it is considered as slight risky. However, this was feasible for ME, since the company has technological skills and competencies to follow an ‘increasing technological newness’ path.
For ME, this can be done through the extension of their product range or through the introduction of new electrical components to the aviation sector. For example, they can carry out further research on the development of new components for their existing customers such as aircraft actuators and engine fan blades, to increase the overall sales volume.
Market Development
Finding new users in new markets for the connectors for aviation-use is the one used in this strategy. This can be done in two ways. First is the increase in the number of users in the new market segments in present geographic markets. There are numerous market segments that ME can develop. An example is the military applications. In addition, improved market research enables them to solve customer satisfaction issues in their current area of operation. Second is the increase in the number of users in the new market segment. This is possible through the geographical expansion into other domestic or export market.
Conclusion
To have an assumption that potential customers have satisfied their needs to a greater or lesser extent, is logical, as well as the idea that entrance into new markets poses you to significant risks due to the high costs of investments and dealing of the unknown. However, despite these facts, market development is the best approach suitable for the growth needs of the ME company.
As summarized in the SWOT Analysis, market development gives better chances for developing the competitive advantage of ME. Due to the long well established reputation of ME for high quality connectors (in aviation and military segments), it is already expected that this connectors will soon be accepted in the new market segments (regional, national, or even global). Aside from that, market development is better for them since the sales staffs are reluctant to sell the new product. They are also more technically knowledgeable regarding this product, therefore making them more motivated to sell this compared to the new ones. Furthermore, the synergies obtained from the shared resources and transferable skills are beneficial for them.
Compared to their choice of diversification, market development is less risky and produces higher rates of expected returns. Therefore, market development is considered the most appropriate strategy for ME, based on the other factors on the previous SWOT Analysis.
0 comments:
Post a Comment