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"SAFETY-DETECTION COMPANY" has been established in the South of France since 1999. The company is specialized in the conception, the manufacturing and the marketing of security systems. 30% of the capital is held by a financial group interested in the profitability.
"SAFETY-DETECTION COMPANY" has been established in the South of France since 1999. The company is specialized in the conception, the manufacturing and the marketing of security systems. 30% of the capital is held by a financial group interested in the profitability.
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"SAFETY-DETECTION COMPANY" has been established in the South of France since 1999. The company is specialized in the conception, the manufacturing and the marketing of security systems. 30% of the capital is held by a financial group interested in the profitability.
Авторское право:
Attribution Non-Commercial (BY-NC)
Доступные форматы
Скачайте в формате PDF, TXT или читайте онлайн в Scribd
This case deals with the real problems that a French company has been recently faced with. The names have been modified, together with some of the financial and marketing elements.
Thus, do not refer to what you could know in other respects about these spheres of activity, even if the main tendencies have been respected.
Some of the elements evoked in this file are incomplete. Consequently, it belongs to you when it is necessary to validate your perceptions by supporting them with quantitative elements and credible assumptions.
Company S.D.C.
3
The Safety-Detection Company (S.D.C.) has been established in the South of France since 1999. This company is specialized in the conception, the manufacturing and the marketing of security systems intended for professional users or for private individuals.
At the origin of the company, there is Mr. PERI, Director of the Research, for a Canadian Laboratory, approved by the NASA, for the treatments of detection and pressurization. At that time, Mr. PERI worked out a detection system, which is activated by the slightest change of pressure - or shock. This device was absolutely revolutionary; it allowed a total safety never reached before. This sensor has changed a lot since then, but the original principle has been preserved. In this business, whether it is amateur, professional, spatial or military, everybody knows very well the PERI detection system. Its extraordinary image has remained practically intact today. Indeed, the risks associated with insufficient safety are such that specialists give the greatest attention to the material.
In 1999, Mr. PERI created S.D.C., whose matter and specificities appear hereafter. 30% of the capital is held by a financial group interested in the profitability of invested capital.
As early as 2004, SDC had a very favorable position on the professional markets, where it is necessary to control the pressurization and activation by shocks techniques for planes, submarines and spacecrafts. Based near TOULOUSE, SDC has an excellent image with the professionals. Although it is very often consulted for all sorts of work or important project, this company is sometimes in competition. Though much less powerful than its main competitor, it benefits from a greater speed of reaction: works are carried out in less time and are delivered with a greater regularity. This turn-key system activity, including tests, uses the products designed by SDC of course.
The customers are countries as well as aeronautics, submariner or space industrialists. The competitive advantage even, for some missions, the differentiated know-how - obtained by the cohesion of the team and by its mobility has often been a decisive element of the choice of the customers. However the market has tended to stagnate. That is why, as early as 2005, Mr. PERI, always attentive to improve the performances of SDC, tackled the problem of fingerprint recognition with an engineer friend of his, Mr. LEON, who recently joined his team. One of the big problems to ensure the total safety is not only the detection of anomalies but also the inviolability of the system. The team thus developed a very effective, voice and digital recognition system. This technique has been patented by SDC. Competitors have tried to copy the process, but until now, their results consolidate the reputation of SDC material.
I The Past of the Company
4
In those days, Mr PERI wanted to secure his company more by positioning it on complementary markets and additional services. Besides turnkey systems intended for professionals, SDC offered detectors and sensors, electronic power stations for supervision and systems for fingerprint recognition for private individuals, in 2006.Those actions were able to make it less vulnerable, with regard to the professional market.
On that more traditional market, there are still the same types of needs today.
- Fitters, or distributors for private individuals, or companies, are specialists in the field of protection of buildings and of private residences against burglary.
- Insurance companies are interested in highly reliable products in order to cut down the number of disasters to be refunded.
- Both of them are very satisfied with the services of SDC, which allow a healthy competition and more varied choices according to whether it is the technique or the price that represents the major criterion of decision.
5
In 2012, the SDC Company carried out a sales turnover of 61Million Euros with 405 people. The services of SDC are of two types.
- On the one hand, those intended for the market of the professionals (Aeronautics, Space, Army.). They are turn-key systems. Each contract is important and represents from 3 to 6 M .
- On the other hand, those intended for the more traditional market of the companies, communities or private individuals. They are the services represented by three types of products:
- Fingerprint Recognition - FATHER detectors and sensors - Electronic power plants
To these products, designed and manufactured by SDC are added- if necessary a few trade products.
According to the destination of the services, the mode of marketing differs:
- For the professional market, there are direct contacts between Mr. PERI and decision makers. These contacts, at the origin of the contracts (2 to 4 per annum), are then given shape by the sales manager in charge of the professional market and implemented by the teams of SDC fitters.
- For the traditional market, there are sales through retail outlets, canvassed by the SDC salesmen, directed by a France sales manager. These selling points referenced SDC as well as its two main competitors.
II CURRENT SITUATION
6
1. The Professional Market
The professional market is obviously a worldwide market. It is made up of industrialists from aeronautics, submarine or space sectors. These industrialists are - according to countries - companies of the public or private sector. The current budgetary restrictions in the field of the armament are likely to cause a temporary or lasting drop of the orders. It also involves a competing fight which modifies the strategic context. Until then the market reacted strongly to offers in differentiation; but, since 2007, price has become an important, if not vital, element.
This commoditization can lead - for company SDC into the drop of the sales turnover (from 10 to 20% per annum until 2016) and of the margins (an approximate 1 to 2% of profitability only over the next few years).
On this market the level of relative performances is represented by this diagram:
III THE COMPANY AND ITSENVIRONMENT Performance / Needs Strong Medium Weak Legend : S.D.C Worldwide Leader Other competitors 7
As shown in the preceding diagram, it is a fact that in this field the technical requirements are very large, and all the products are perfect in quality, as a consequence of maximum safety constraints:
- Working conditions are often borderline - Safety constraints are very generously calculated: accidents can have unacceptable human and financial consequences. - Research for the improvement of the products is carried out permanently.
Its a market of system integrators and not only of products manufacturers. The products are integrated in the total service.
2. THE TRADITIONNAL MARKET
According Mr. PERIs current choices, SDC is only active on the French market whose characteristics are:
- A penetration rate still lower than that existing in other European countries (4 to 5 times more equipped in collective: building, or private individual: apartment/villa).
- The annual growth rate over the last 10 years is estimated an approximate 10 to 15% per annum
- This growth will be homogeneous in rural or urban environment, as well as in new, restoration, or simply installation of a safety system against burglaries.
The materials are much simpler than those used by PROS, but they benefit from the professional improvements. The reputation of a company is boosted when it is known it comes from the professional market.
The materials are classified in 4 categories:
- The very technical material: Father detectors/sensors
NB: A father orders from 5 to 10 decentralized sensors or detectors
- Electronic Power stations. Quality goes from reliable to not very reliable.
- Fingerprint recognition products: currently quasi-non-existent except the SDC offer.
- Standardized secondary products bought by manufacturers at low prices (trade).
8
* The Secondary products are on markets which become more and more competitive because of the invasion of products made in Southeast Asia
* The electronic stations follow the same way. Because of technicality, we can hope to preserve a few trump cards in terms of innovation capacity: that slight competitive advantage allows their products to be chosen, even in case of equal price.
* The market of the very technical materials is less competed and this market is in differentiation.
* The fingerprint recognition market knows no real competition today. It represents a sales turnover, in France, of about 30 M in the year 2016 and of 7.5 M since 2013.
In fact, there is what we could call commoditization through the bottom; that is to say through the secondary products, at medium-term by electronics stations, and in the longer term towards the technical equipments.
SDC has acquired a decisive technological advance in the field of detectors/sensors. That jealously kept secret concerns a completely particular technique. The deposited patents have blocked imitations until now, and do not allow to understand, what this famous KSF consists in. The advance of SDC is even more decisive with fingerprint recognition.
The distribution system is represented by:
- 40 specialized retail outlets: they manage the approved fitters most of the time thanks to their technical salesmen. Their sales are 40% of the sales turnover of the activity.
- 100 renowned retail outlets even if they are not specialized. Their sales are 30% of the sales turnover of the activity.
- 300 commoditized retail outlets, among which the hypermarkets, whether they are specialized or not. Their sales are 30% of the sales turnover of the activity.
Advertising is principally made on specialized magazines.
Promotion is made through exceptional discounts in the retail outlets, special payment conditions, improvement on the delivery conditions.
A few competitors provide free material to the purchasing advisors (architects, companies of Building and Public Works Sector. These competitors make good products but are not present on the professional market
9
1 GENERAL POLICY
Mr. PERI has very strong technical skills. He makes it possible - thanks to a system of delegation with his collaborators - to allow them a wide autonomy so that they can motivate their staff themselves. For Mr. PERI participation at all levels, is a key success factor. Bonuses reward original ideas and this participation is appreciated by the staff. He permanently fights for development, technology and return on investment. His shareholder for 30 % shares those objectives.
2 THE TECHNIQUE The company production tool is in good condition and allows to face, if need arises, a growth of about 30 %. Then an investment of 2.3 M would be necessary to double the capacity. In research and development an annual budget of 0.5 M. is necessary to preserve ones technological advance. The technical manufacturing staff is competent and can quickly exploit new ideas. The installation staff who works on the professional market is excellent, but it will be not easily usable except as technical sales representative. However, a fall of 6 to 7.6 M in sales turn over on the "PRO" market would not create major problems for the reconversion of the installation staff.
All in all, high-performance equipment, a good adaptability of the staff, a strong flexibility, continual financial requirements in innovation and a possible investment in production are to be planned.
3. THE COMMERCIAL
- The salesmen are more technical tradesmen than simple representatives. They are, often - thanks to the information that they trace back - at the origin of evolutions, on products (even commoditized), and, on adjustment of the service policy (spare parts, snap answers).
- Good cover value of the company and good image with the purchasing advisors (prescribers). A weak commercial presence on the commoditized retail outlets: Numerical Distribution 10 %.
4. THE ORGANISATION
The staff is united and motivated. The information system is efficient. On the other hand the control system can be improved, considering the specificities of the "PRO" and Traditional markets.
IV S.D.C INTERNAL SITUATION
10
The general organization is well adapted to the current needs of the company. However the characteristics of this type of company are such that - facing fast evolutions of the environment which can lead indifferently to: a rapid growth (by diversification or not), a regression or a rebalancing of the activity business temporary or even lasting loss of balance is not unlikely to occur.
5. THE DYSFUNCTIONS
They mainly originate from:
1) A fall in profitability on the PRO market. The origin of this fault is the probable need in order to avoid redundancies- to preserve a minimum of sales turnover on the PRO market. This obligation induces a cut on the sale price, thus, on the margin.
NB: This dysfunction could be avoided by making redundant part of the staff specialist of the installation in that field of activity.
2) A lack of performance in the electronic power stations. This dysfunction mainly originates in a lack of presence in 90 % of the commoditized retail outlets.
NB: For SDC, one commoditized retail outlet can provide 0.15 M of selling TO/ year. Could this increase of the numerical cover (ND) damage the global image of SDC?
3) An insufficient commercial action on the fingerprint recognition equipments. The market is very eager for them today (see parag. 2: "The traditional market ") and three technical sales representative specialists could be operational in less than 6 months.
4) No activity outside France on the traditional markets, whereas the PRO image of SDC worldwide could allow (subsidiary, importer, partner) a fast setting-up in Germany, Great Britain, Italy and Benelux of fingerprint recognition equipments.
NB: This fault particularly originates in Mr. PERIs fear to tarnish its PRO image in those countries by diversifying on the traditional market. But this brake is probably negotiable with Mr. PERI if the arguments are relevant and coherent.
11
6. FINANCIAL ASPECTS
6.1. SIMPLIFIED BALANCE SHEET (million euro M)
ASSETS
10
11
12
LIABILITIES
10
11
12
Net fixed assets
Stocks
Practicable and available
Customer balance
Other posts
Banks
9.1
7.6
13.8
1.5
0.8
10.7
6.1
15.2
1.8
1.2
11
5.8
16.7
1.5
1.5
Stockholders' equities and reserves
Result
Long-term debts
Suppliers
Other debts
13.8
2.8
4.6
4.9
6.7
15
3
4.8
4.6
7.6
16.5
2.6
3.8
5.3
8.3
TOTAL
32.8
35
36.5
32.8
35
36.5
12
6.2 SIMPLIFIED PROFIT AND LOSS ACCOUNTS (M)
Particulars
2010
2011
2012
Sales Turnover
Stock (variation)
Production
Cost of materials consumed
Gross margin
Expenses
Added Value
Personnel expenses &Taxes
Earnings before interest, taxes, depreciation and amortisation
Depreciation
Intermediate Result
Financial Expenses
Net Profit before tax
54
5.3
59.3
23
36.3
11
25.3
18.3
7
1.5
5.5
1.2
4.3
56.4
1.5
57.9
21.8
36.1
9.5
26.6
19
7.6
1.5
6.1
1.7
4.4
61
1.8
62.8
24.7
38.1
11
27.1
19.8
7.3
1.5
5.8
1.5
4.3
NB: The activities are, at the origin of the following in M
1. Very technical equipments: detectors / sensors, TO 12.2 M, gross margin 1.4 M ( TO and margin in regular growth)
2. Fingerprint recognition equipments TO: 2.3 M, gross margin 0.5 M (TO and gross margin in very strong growth). In 2009, the TO was only 0.3 M
3. Electronic power stations: 18.3 M of the TO, a margin of 0.9 M in light regression, gross margin in sensitive decline: 5% of the TO in 2009
4. Professional market: 28.2 M of the TO, gross margin 1.5 M (constant TO, gross margin in weak regression: 7 % of the TO in 2009)
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6.3 SOME OF THE COMPETITORS FINANCIAL ELEMENTS
Here we deal with the main significant competitors: size or suitable competitive place.
Competitors
Financial elements millions euro
Technical equipments Detectors/ sensors PERES
Equipments for fingerprints recognition
Electronic stations
PRO Market
TO (based on 100)
Profit before tax
Cash Flow
Interest Charges
Stocks
Accounts Receivable
Accounts payable
100
4
2.4
2
20
20
14
N
O
N
E
100
8
10
2
20
25
17
100
12
18
1
5
30
15
NB :
The competitors have long-term debts of about 50 % of their stockholders' equities.
The working capital finances stock by 90%.
The competitors profitability is obviously weaker than that of the SDC on its domains in differentiation. It is not the case, of course, for the commoditized activities where the size and the effect of experience discriminate SDC.