Strategy and Business Environment Assignment
Strategy and Business Environment Assignment Class Student name Submit Date : MBQPM4 : Ha Trung Hai : December 9th 2012 1. Introduction SKF is one of the leading global suppliers of products, solutions and services in the area of rolling bearings, seals, power transmissions, services and lubrication system. The company business is divided into three divisions Industrial, Automotive and Service. Each division serves a global market, focusing on its specific customer segments.
SKF has over 100 manufacturing factories all over the world and its own sale companies in 70 countries.
SKF is also represented in140 countries through over 15,000 distributors and dealers. It is always close to customers for the supply of both products and services. SKF was founded in 1907 and from the beginning it focused intensively on quality, technical development and marketing. Nowadays, SKF is the biggest company in bearing field in the world. It continuously improves products and services with the highest quality and the latest technology to satisfy the demands of customers.
In Vietnam, SKF Vietnam is a Representative office which was established in 1991 with over 30 employees. After 21 years, SKF Vietnam has developed sharply with 38 distributors and dealers around the country to provide customers best products and services to all kind of industries. 2. SWOT Analysis 2. 1 Strengths Worldwide brand, lots of well-known companies in the world are using SKF products for its production lines or engines or machines. In the market for over 100 years.
In early of 20th century, it was considered a monopoly company in bearing segment.
SKF always stays up to date and keep its customers updated by helping continuous training its staffs. The products quality is very high and it is evaluated as the best products among bearing manufacturers around the world. 2. 2 Weaknesses – The selling prices are always higher than competitor’s selling prices.
– The sales team is not strong enough to cover market. Thus some major competitors from Japan like NSK, NTN or Nachi has chance to attack SKF’s existing customers – Working policy is not clear and not good enough to keep experienced employees to work for long time. 2. Opportunities In Vietnam, A developing country, it is considered a very potential market due to the economic growth with high rate and the increase of foreign investors in industry segment every year. The number of European investors in Vietnam increase significantly. They usually prefer to use European products for factories or manufacturing because of high quality products.
Therefore SKF has advantages to supply its products to these types of customers. 2. 4 Threat There are many major competitors from Japan and America such as FAG, NSK, Nachi… who competes with SKF by better selling prices.
Especially, in Vietnam market, the price is very important when negotiating with customers. 3.
PESTL Analysis 3. 1 Political – The Government’s policies for foreign investors are not stable and always change. Therefore SKF has to change company’s policies of business activities accordingly to adapt the changes. – SKF has a trading policy to forbid employees giving commission to customers. It will be considered lubrication or corruption. And this policy is making difficulty to sell SKF’s products to state companies.
3. Economic SKF Vietnam is being influenced by the macroeconomic factors and due to the slowdown of the Vietnam economy recently, the total revenue is almost flat from 2009 to 2012. The increase of import taxes is also a factor which impacts to SKF’s revenue. The interest rate is quite high. Thus, some key OEMs cannot reach the loan for their manufacturing and consequently, they reduce buying products from SKF.
3. 3 Social SKF Vietnam is a brand of SKF group. Therefore it has to follow the code of conduct of the group. SKF has to take responsibility toward customers, distributors, employees, society and shareholders.
SKF commits to provide good quality working environment and conditions to its employees.
It continuously develops skills and competencies to enable the individual’s satisfaction and career possibilities. 3. 4 Technological Every year, SKF introduce products and services which are integrated higher technologies to the global market including Vietnam market. These new products and services will bring benefit to customers. By buying products from SKF, customers will get new knowledge and useful technologies which can help them to minimize manufacturing costs.
4. Environmental Analysis using Porter’s Diamond . 1 Factor Conditions. In South East Asia, SKF has a big factory in Indonesia to manufacture bearings and other products which will be delivered to SEA market. And in the future plan, it is going to set up new factories in Vietnam, Thailand.
From these countries, SKF will have low labor cost, goodwill in hiring land and taxes as well as natural resources such as material availability, cheap energy. Consequently SKF will have competitive advantages when competing with competitors in this region. 4. 2 Demand conditions. Bearings are very important parts for any rotating machine in the factory or vehicles.
The OEM and users require high quality products and services. And SKF is always a leader about the products quality among bearing manufacturers in the world. And that is the reason SKF is the main supplier for European Car companies such as Mercedes, BMW as well as the Engine Maker such as Rolls-Royce. In Vietnam market, these companies have already set up assembly center and they are also using SKF’s products. 4. 3 Related and supporting industries.
In the Factory in Indonesia, SKF buys materials at reasonable prices from local companies for its manufacturing such as stainless steel, brass.
SKF is using local logistic company who can transport and deliver goods to customers in the SEA region. In Vietnam Market, SKF Vietnam is also using a local logistic company who can provide quick delivery to customers whenever they need. So this is also a factor which can make SKF different to others. 4. 4 Firm strategy, structure and rivalry.
In Vietnam Market, it is about 35% market share which belong to SKF in bearings and Seals sector. The rest 65% is divided into small pieces for companies from America and Japan such as FAG, NTN NSK and Chinese bearings manufacturers.
Although SKF has the highest percentage of the market share, the key competitors FAG, NTN are gradually to increase their volume. So the competition is quite strong and SKF has to upgrade itself frequently to adapt new environment. – Besides that, SKF is focusing on investment about the technical excellence and R which can bring competitive advantages to SKF when competing with other manufacturers.
5. Comparison of the results in term of strategy design. 5. 1 SWOT Analysis. From the SWOT analysis, it shows the interaction between the internal factors and the external factors in order to design appropriate action plan for company.
In this case, after doing analysis, SKF has to have a good action plan to keep its position in the market.
The key points of above SWOT analysis are : + Strengths: Well-known, high quality. + Weakness: high selling price. + Opportunity: new potential market + Threat: lower selling price from competitors. 5. 2 PESTL Analysis From the PESTL analysis, it helps to build future goals for company for business and to adapt changing environment.
The key points of above PESTL analysis are: + Political: Policies for foreign investors are not stable + Economic: the influence of macroeconomic factors, taxes and interest rate. Social: commitment and responsibility of the company. + New technology on the products and transfer technology to users. 5. 3 Porter’s Diamond Analysis.
From the Porter’s Diamond analysis, it helps SKF to identify competitiveness to others competitors and to build appropriate business strategy. The key points of above Porter’s diamond analysis are: + Factor conditions: Labor cost and taxes and cheap energy. + Demand condition: high quality products. + Related & supporting industries: using local supplier and local services. Firm strategy, structure and rivalry: the market share of the company, making competitive advantages by investment to R and technology.
From the three models, it can be seen that the key points of each model are different to others. There are some key points are similar. In this case, the Porter’s Diamond is a suitable model for SKF to analyze and in order to make good business plans which are based on the competitive advantages in the market place. Because it helps company to understand the market requirements as well as the competition with competitors. SWOT and PESTL are also very helpful. 6.
The key success factors for an effective strategy in SKF Company are: Train sales staffs to be professional sales man to do sale professionally. Have to follow the code of conduct strictly The working policies must be clear so that the company can keep qualified staffs to work for company long time. Have to eliminate the existing weaknesses. Identify the key competitors in the market and analyze the market share so that the company know how and where to focus on the market.
Analyze the selling price and the sales activities of key competitors so that the company has plans to compete and outdo the rivals.