Case study 6.

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CASE STUDY 6.1

SAN A/S
SAN A/S, 1 a company incorporated in Denmark, man-
ufactures electric heating products for the industrial
market. The company was founded in 1950 and was
involved in a limited way in the production of heating
elements. Its primary activity originally consisted of act-
ing as a trading company handling products for other
manufacturers. This relationship has gradually shifted
and the company now generates the greatest part of its
sales volume from its own production, handling only a
few products of other manufacturers that complement
its own production. Production, sales, and profitability
have grown steadily, and by the early 1970s the com-
pany had a dominating share of the Danish market for
its products.
Growth has been achieved mainly by an increase in
export sales. The company’s recent export expansion is
the result of increasing involvement in larger-scale pro-
jects. Production of small products is set to be unchanged
in the coming years, and the company has not been very
active in seeking to export these small products due to
intense competition in overseas markets.
Company objectives
The company’s stated primary function is the coverage of
industrial needs for electric heating products in Denmark
and abroad. The company seeks to compete primarily on
the basis of its know-how, product development, and ser-
vice. Expansion is sought through export, as the Danish
market no longer offers expansion possibilities. The com-
pany aims to increase its sales by at least 15% per year,
and this expansion is not to occur through competition
with mass-producers.
Disguised name
1
The company’s products, resources,
and organization
SAN A/S develops and produces custom-made load resis-
tors and electric heating systems, and standard heating
elements and cables. The company describes this as a
narrow, deep, and consistent product mix. Heating sys-
tems are designed to customer specifications and include
heaters for water, fluid, chemical, plastic, and oil heating;
industrial ovens; air duct heaters; unit and battery heaters;
defrosting elements; space heating systems; and tunnel
ovens. The know-how acquired through the development
of heating systems to customer specifications enables the
company to develop new standard heating elements and
cables that have a technological lead over similar prod-
ucts. The products are consistent in that they have similar
production requirements, distribution channels, and, with
the exception of load resistors, the same market.
The company is economically sound, and its steady
expansion has not caused profit or financing problems.
The company now operates at its full production capacity
and is in the process of expanding its production facil-
ities. In spite of this capacity expansion, the company
anticipates that its continuing sales growth will result in
a continued full utilization of capacity. This high capacity
utilization has led to delivery delays in the past, and the
company has now decided that delivery time for its stand-
ard products must not exceed six weeks.
SAN A/S is a Danish company that is 100% privately
owned, with its own production facilities located near
Copenhagen. At present there are 70 employees, of whom
eight are civil engineers and 12 are technicians. Product
development is typically organized in project groups. The
company sells directly to customers in Denmark, and both
directly and through import agents overseas.
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267
Chapter 6  Information for international marketing decisions
Market
The company’s customers are mainly industrial proces-
sors. Heat processes have almost countless applications.
The petrochemical industry and industries with a drying
process are of particular importance in SAN’s market.
The company concentrates solely on electric heating pro-
cesses. These can be divided into those in which heating
requirements can be covered by standard and mass-pro-
duced products, and those in which requirements demand
the development of tailor-made products or systems.
The market for standard and mass-produced heat-
ing elements and cables is well developed; there are
established producers in all industrialized countries and
competition is intense. The buyer is seeking a product
that can fulfill specifications that can be met by many
suppliers. The market demands high quality, quick deliv-
ery, good parts availability, and a competitive price. The
buying decision is typically made by an engineer seek-
ing to reduce operating costs. Competition in the market
for special products and systems is less intense, as there
are fewer suppliers. Here the buyer is seeking a supplier
whose know-how will help to develop a product or system
that can fulfill new specifications – for example, higher
heating temperatures, better heat-to-energy ratios, resist-
ance to corrosion – that are not available with existing
products. The buyer still demands high quality and good
back-up (parts availability and service) but is not seeking
quick ‘off-the-shelf’ delivery. Price is also of less impor-
tance, as the product or system is required to pay for itself
through either reduced operating costs or increased pro-
ductivity. Again the buying decision is typically made by
an engineer. Direct contact between the buyer and the
supplier is important in the buying process, as the product
development is a new task for both parties.
Export markets
SAN is a niche marketing company and has had a typical
export history. As the home market became saturated, the
company started exploiting the possibilities in geographi-
cally and culturally close markets through import agents.
Exports started with the Scandinavian countries and
have since expanded by agents to most of western Europe
(except Germany and the United Kingdom), Poland,
Greece, and North America. At the present time the com-
pany has no international investments in the form of sales
or production companies or joint ventures. As export now
accounts for a rapidly increasing share of sales, manage-
ment is becoming increasingly interested in being able to
control its international marketing efforts. The company’s
268
expansion strategy, therefore, is to establish sales compa-
nies wherever economically possible, and agents are seen
as a second-best solution.
The growing share of sales accounted for by pro-
ject-export has also led to a changing emphasis in market-
ing strategy. While import agents have fulfilled a useful
role in establishing SAN’s export of products, their use
in project-export is much more limited, as direct infor-
mation exchanges between the supplier and the buyer
are very important. For the company this means that
increased expansion will lead to increased direct involve-
ment in foreign markets. In some foreign markets there is
a dual-distribution system in which SAN is responsible for
projects and special products and agents are responsible
for small and standard products.
Expansion to Australia
As part of its long-term expansion strategy, SAN is consid-
ering entering markets in other parts of the world. One
such market is Australia, where SAN has had no export
experience. Due to the company’s present expansion in
Scandinavia and western Europe, it has limited resources
to devote to the Australian market. The company is some-
what cautious and not anxious to expand too quickly. In
the short term, therefore, if the company were to enter
the Australian market its goals would be twofold: (a) to
establish the company’s reputation in Australia, with a
view to more intensive market development at a later
stage when resources permit and (b) to obtain a quick
return on its investment in order to avoid delays in its
expansion in other markets as a result of a financial over-
extension in Australia.
Management has authorized a comprehensive market
study with the following objectives: (a) analyze the Aus-
tralian market and determine the sales potential for the
company’s products; (b) evaluate the different marketing
strategies and policies that might be used; and (c) choose
the strategy and policies that harmonize best with the
company’s expansion strategy and current resource
availability.
Questions
1. Explain how secondary information can be used
to meet the objectives of the market study.
2. What kind(s) of data and sources of such data
would be useful?
3. Should SAN A/S enter the Australian market?
Defend your answer.