Вы находитесь на странице: 1из 19

Strategy Selection

Excel engineering is a company that manufactures tractor parts for its clients
like Milat tractors and Al-ghazi tractors. As there are other companies as well that supply the
tractor parts so in order to remain competitive in the market excel has to have a competitive edge
over its rivals so that it can maintain its market share and remain profitable. Excel tries to
continuously innovate and invest in technology to get latest machinery and manufacture tractor
parts more efficiently. As they have recently invested RS 100 million in computer numerically
control machines (CNC) which increases the productivity. To have a competitive edge excel
undertakes machined casting of the tractor parts and is the pioneer in doing so. However, Chenab
engineering also does machined casting but they are the followers and have not gained the
follower advantages yet and Excel still has the first mover advantage in doing so. It is striving to
achieve competitive advantage by continuously adapting to changes in external trends and events
and internal capabilities, competencies and resources and effectively formulating, implementing
and evaluating strategies that capitalize upon these factors.

Differentiation
Excel use differential appeal in its products that it manufactures with the
different and technologically advanced machinery with new and advanced production processes
like casting, forging, welding, machining and research and development.

Diversification
Excel engineering does not diversify and it only makes tractor parts but it is a
subsidiary of Excel group and excel group as a whole diversifies in a lot of other businesses. It
undertakes un-related diversification in Excel Cards, Excel solutions, Print sol, Excel
constructions, Corporate Courier services and SBC (PVT) Ltd.
Distinctive competencies
Excel maintains its distinctive competencies by being a pioneer in doing machined
casting of tractor parts, moreover it maintains a strategic alliance with its customers and keep
them happy and satisfied as they deliver goods on time and thus have brand loyal customers.
Also it is a largest manufacturer of tractor parts so this makes its brand name popular with the

customers and also the suppliers. Moreover it also has very strong bonds with its employees as
they take care of their needs and thus have motivated employees.

SWOT Matrix
Strengths

Weaknesses

1. Largest manufacturer in the


market 40% market share
2. One of the very few
machined casting
manufacturers in Pakistan

1. Decreasing Cash flow


21%
2. Decreasing Net
Income 33%

3. Supplies major tractor


manufacturers (AGTL & MILLAT)

3. No diversification

4. Renowned and trusted


reputation and image

4. Limited access to
international markets
(Spain, Turkey and Italy)

5. Close proximity to the Motor


Way (9Km )
6. Only two competitors (Bolan
and Chenab)
7. Two strategic partnerships
(AGTL & MILLAT)
Opportunities

SO Strategies

WO Strategies

1. Export of cheap tractor


parts (low taxes on exports
i.e. 1% of sales and cheap raw
material)
2. cheapest tractor
manufacturing happens in
Pakistan (imported tractors
cost much more than local
tractors)
3. Start tractor assembly

1.Expand in to new export


markets (Canada and USA)
S1,O1 & O2

1.Start diversifying in to
more products like,
turbine pumps W3 &
O4

2.Start tractor assembly S2,3,4,


O2,3 ,4,5

2. Export to emerging
markets so that less tax
has to be paid and more
profits can be generated
W2 & S1,2

4. Acquire more land for


expansion (cheap land is
available nearby)

5. Growth potential (Punjab


has agro based economy)
Threats

1.Government oversight
regarding exports

ST Strategies
1. Start a cartel with Bolan and
Chenab in order to gain more
purchasing power over
suppliers and deal with the
government on its own terms
S1,3,4,7 & T1,2,3,4,6

WT Strategies

1.Setup production
plant in Bangladesh or
China W2,4 & T1,2,3,4

2. Climbing prices of key


inputs (5% increase in raw
material price)
3. New GST 16%
4. Economic downturn by
3.5%
5. Pressure by
environmentalist
6. Sensitivity to Government
regulations

Space Matrix
Ratin
g
Financial Strength:
EPS decreased by 33.82%

+6

Decrease in inventory turnover days from 8.63 to 7.10

+4

Decrease in current ratio from 1.12 to 1.04

+4

Increase in accounts receivables turnover from 5.64 to 7.80

+3

Industry Strength:
Cheap production of Tractors in Pakistan

+6

Growth Potential

+5

Technological know-how

+5

Financial Stability

+4

Environmental stability:
Rate of inflation

-5

Demand of Tractors

-2

Increasing Competition

-3

Pressure by Environmentalists

-3

Competitive advantage
Market share

-1

High product quality

-3

Customer loyalty

-1

Strategic Alliances with Customers

-2

Technological know-how

-2

Financial strength average = (+6+4+4+3)/4 = +4.25


Industry strength average = (+6+5+5+4)/4 = +5.00
Environmental stability average = -1(5+2+3+3)/4 = -3.25
Competitive advantage average = -1(1+3+1+2+2)/5 = -1.80

Directional vector:
X coordinate = FS + ES = +4.25-3.25 = +1
Y coordinate = IS + CA = +5.00-1.80 = +3.20

FS
6
Conservative

Aggressive

4
3
2

(1, 3.2)

1
CA

-6

-5

-4

-3

-2

-1

1
-1
-2
-3

IS

Defensive

-4

Competitive

-5
-6
ES

After listing all the factors and giving them rating accordingly the averages are mentioned
above. And after calculating directional vector points the line stretches in the first quadrant.
Which means the company needs aggressive strategies like:

Backward, forward or horizontal integration.


Market penetration.
Market development.
Product development.
Diversification related or unrelated.

BCG Matrix

The main products sold by Excel Engineering are tractor parts. Tractor parts form the
major part of the sales of the company. The company has high market share in the tractor part
manufacturing industry. Apart from this company, there are only two large companies that
manufacture tractor parts. They are Chenab and Bolan Engineers located in Faisalabad and
Karachi respectively. Excel is larger than both of those two companies in terms of sales and
market share. As a result of that, it lies in the far left corner of the BCG matrix. However, the
company is a mature firm so it has very less market growth. This puts it down in the Cash Cows
quadrant of the BCG matrix.
As this company lies in the third
quadrant according to the reasons mentioned above, the strategies which this company should
consider are as follows;
1.
2.
3.
4.

Product Development
Diversification
Retrenchment
Divestiture

Internal External Matrix:


IFE total
weighted score

II

III
Strong 3.00 to

4.00

Average

Weak 1.00 to 1.99

2.00 to 2.99

IVExcel

VI
Strong
3.00 to 4.00

VII
VIII

IX

EFE total
weigh

score Average 2.00


to 2.99
Weak
1.00 to 1.99

Total weighted score of EFE is 2.38 and total weighted score of IFE is 3.29, Excel
Engineering falls in the 4th quadrant this shows that Excel Engineering should follow grow and
build strategies which include Market penetration, Market development, product development
and backward, horizontal and forward integration.

Grand Strategy Matrix:

According to our companys current position it falls in the first quadrant. This is because
the company boasts a 40% share in the market. This indicates that the company has a strong
market position. The company also has medium market growth. This is because the company is
maturing and growth is slowing down. The company has an excellent strategic position but it
needs to improve because the declining market growth will cause problems if the company does
not react. It needs to carry out strategies such as market development, product development,
market penetration, and integration strategies such as horizontal, forward and backward vertical
integration.
Market development
Excel should cater to new export markets such as Canada, United States and Italy. This
would help the company to grow, since its growth is already declining.

Market Penetration
The market penetration does not apply to this company as it is already is extensively
rooted in its current markets.
Product Development
The company desperately needs to develop new products in order to expand its portfolio
because the companys growth is slowing down.
Forward Vertical Integration
In order to expand the companys business, it needs to carry out forward vertical
integration. Currently it is involved in the manufacturing of tractor parts. However, it needs to
start manufacturing tractors. This would increase the profits of the business.

Strategy Selection
Intensive

Integration

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy
Matrix

Diversificatio
n

Defensive

Decision Stage
The above analysis shows that Intensive strategies is the best option because Grand
Strategy matrix use intensive first and then integration strategies and then as a last resort go for
diversification. So, Excel should opt for intensive strategies.

QSPM Matrix:
Start production

Introduce the

of Turbines

existing products
into the Italian,
American and
Canadian
Markets

weight

As

TAS

AS

TAS

0.15

0.14

0.42

0.56

3.Start tractor assembly

0.02

4. acquire more land for expansion

0.05

0.2

0.15

0.1

0.3

0.4

Opportunities:
1.Export of cheap tractor parts (low
taxes on exports i.e. 1% of sales and
cheap raw material)
2.Cheapest tractor manufacturing
happens in Pakistan (imported
tractors cost much more than our
local tractors)

(cheap land is available nearby)


5. Growth potential (Punjab has Agrobased economy)

Threats:
0.1

0.2

0.1

0.07

0.14

0.21

3. New general sales tax (16%)

0.1

4.Economic downturn by 3.5%

0.1

0.4

0.3

1.Government oversight regarding exports


2.Climbing prices of key inputs (5% increase in
raw materials price)

5.Pressure by Environmentalists

0.07

0.2

0.3

0.1

0.4

0.3

0.2

0.4

0.8

0.2

4.Reknowned and trusted reputation and image

0.08

0.32

0.16

5.Close proximity to the motorway (9 km)

0.05

6.Only two competitors (Bolan and Chenab)

0.07

7.2 strategic partnerships (AGTL and Millat)

0.1

1.Decreasing Cash Flow 21%

0.06

0.24

0.18

2.Decreasing Net Income 33%

0.06

0.24

0.18

3.No diversification

0.05

4.Limited access to international markets

0.03

0.06

0.12

6.Sensitivity to Government Regulations

0.1
1

Strengths:
1.Largest manufacturer in the market (40%
market share)
2. One of the very few machined casting
manufacturer in Pakistan
3. Supplies major tractor manufacturers (AGTL
and Millat)

Weakness:

(Spain, Turkey and Italy)

Total

3.36

3.56

Strategy 1
Start production of Turbines
Strategy 2
Introduce the existing products into the Italian, American and Canadian Markets
The scores of both the strategies are very close, but still the 2nd strategy shows a higher
score of the two proposed strategies. So Excel Engineering should focus on the second strategy,
by entering the markets of Italy, America and Canada. This would give company the exposure to
new markets with great potential of this business. Canada and America are working a lot on their
agriculture sector, so the demand of tractor parts is also generated there. The problem could be of
transportation because of the heavy weight of tractor parts, but now days this is possible due to
technological improvements.

Positioning Map:

High Price

Excel
Chenab

Poor Quality

Bolan

Better Quality

Low price

Type of organization structure:


The business structure which Excel Engineering currently follows is the functional
structure. As it is a manufacturing company, it has a centralized structure to reduce costs and be
more efficient. A functional structure groups tasks and activities by business function, such as
production/ operations, marketing, finance/ accounting, research and development, and
management information systems. Another reason for Excel to follow this structure is that it
promotes specialization of labor, and encourages efficient use of managerial and technical talent.
It also minimizes the need for an elaborate control system and allows rapid decision making.

Hierarchical level:
Excel employs 400 skilled labors. The company follows a functional hierarchical
structure. It is a Pakistani company based in Lahore. The business environment in Pakistan in the
manufacturing sector does not allow it a lot of flexibility to adopt new and advanced hierarchical
structures. Thus the company sticks to a functional structure as it is cheap to implement and suits
the current operations of the firm. The span of control is small while the company maintains a
small number of hierarchical levels in order to maintain efficient communication and control.

Tall Structure:
Looking at the above two variables we can say that the company has a tall organizational

structure and the core reason of having a tall structure is the centralized decision making of the

company. The company has five levels of hierarchy. The decision making process is centralized
because the quality of the products cannot be compromised. So the major decisions are taken by
the senior management of the company to ensure the right choice.

Approach to decision making process:


The company follows a centralized decision making policy. The CEO and other members
of the board take the major decisions of the company and they trickle down to the lower levels of
management who then command the labor force to commence production according to the
requirement mentioned by the seniors.

CEO of the Company:


The CEO of Excel Engineering is Mr. Adil J. Mansoor. He founded the company in 1981
with the name of Adil Enterprises. It was later renamed as Excel Engineering (Pvt.) Limited in
1991. He has tremendous experience in the steel business as he started his corporate life as a
manager at steel foundry. This motivated him to start his own business and his dream finally
came true in 1981. He is very dedicated towards his business, Excel Group. Without him it
wouldnt have been possible for the company to achieve these heights of success. As a leader he
has been tremendous. His vision was clear from the start, thats also a reason for the companys
success.

Hierarchy of Aims:

Long term company


objective
Start tractor assembly

Divisional Annual
objective Achieve 50%
growth in export sales

Research and development


Research into Green
Manufacturing and Green Tractors

Production annual objectives


Increase production efficiency and
decrease production time per unit

Marketing annual objectives


Increase the number of
international customers by 50%

Personnel annual objectives


Reduce employee absenteeism
from 5% to 1%

Strategy Evaluation
Excel Engineering should follow the advantage strategy. This allows it to create and
maintain a competitive advantage over its competitors in the manufacturing of tractor parts.
Competitive advantage can occur due to excelling in three areas relative to competitors. These
areas are;
Resources
Skills
Position

Excel Engineering is a subsidiary of the Excel Group of Companies. As a result of that, the
company is financially secure. This gives it an edge in terms of resources over other competing
businesses. In terms of skills, the company has an edge over all others. The company retains its
employees successfully, whether they are from the labor class or from the white-collar class. It
even promotes the recruitment of the children of those employees. As a result, the development
of skills in this company is immense. It enables it to specialize in numerous fields all at once. In
terms of position, the firm is renowned as a high quality manufacturer of tractor parts and has the
largest market share in Pakistan.
To evaluate strategies the company follows a balance scorecard approach. It allows the company
to evaluate strategies from four perspectives;
Financial performance
Learning and Growth
Customer knowledge
Internal business process
After that the company extracts information, it uses the information to answer the following
questions;
1. How well Excel Engineering is improving and creating value measures such as technological
leadership, products quality, the manufacturing process efficiencies and innovation?
2. How well is the firm sustaining and even improving upon its core competencies and
competitive advantages?
3. How satisfied are the firms customers?
Answering these questions presents Excel Engineering with information about its current
position. As a result, the directors of the firm can use this information to further improve
company performance.

Recommendations
Excel Engineering holds a 40% market share currently. This makes this company the
market leader. The major competition is faced from Chenab Engineering, which operates in
Faisalabad. The pioneers of machined casting were Excel but now Chenab is also in this
particular operation. The overall market is not doing very well currently, so Excel needs to think.

The demand for tractors is decreasing as is the purchasing power of the customers. This is all
a result of the economic downturn. Due to increase in tax rates previously, there were very less
profits generated. Cash flows of the company also got hit in this entire crisis. Hopefully the
recommendations which we are going to propose would be of some help to the Excel
Engineering:

Company should revise its mission statement and include the 9 factors which a good

mission statement should possess, so that it gets the right direction for future
The existing organizational structure should not be changed, its centralized at present
and it will work best in this manner. Whereas it should include a comment box for its
employee suggestions, this improves the work environment for the personnel and it adds

to the existing knowledge of the business


As far as the strategies are concerned, the company is only producing tractor parts and it
depends only on two main customers; so it should use diversification strategy and come
up with more product line and customers. Moreover, integration is also very attractive at

this stage as it will help reduce risk of losing customers


The recommended strategy is intensive; this again deals with market development,
product development and market penetration. Expanding markets and products is the

main focus of this strategy


It should expand to the Western Markets ( international ), USA, Canada and Italy
It should diversify into new products, Turbines
It should make its operations more efficient so the drop in cash flows could be recovered
Set up production plants in China and Bangladesh, for cheaper production and more

stability
It should consider exports as its major sale because local market is in recession
There are only two major tractor assembling companies in Pakistan, so the company

should consider international customers as well


This company should maintain its relationship with its customers as there are only two

major customers
They should buy in bulk so that they can receive discounts on purchases
The operations should be designed as such that they reduce wastage and be more

efficient
It can go for tractor assembling, for future survival and even growth
It should start manufacturing car parts as well, as it is one of the most emerging
industries

Conclusion
In the conclusion we wouldnt say much as the report is too detailed itself, so it gives all the
information. The executive summary lists all the sections of the report and also highlights each
section included in the report. The company is doing pretty well but will have to diversify and
use integration strategies for future survival and growth. The company lacked in profits last year
due to high tax rates but now once again it is enjoying reasonable tax rates, i.e. 10%. The
economic conditions of Pakistan are deteriorating day by day, so it should go into foreign
markets, like USA, Canada and Italy and if there is an opportunity to set up plants in China and
Bangladesh, it should not hesitate to take advantage from such options.

Вам также может понравиться