Business/Able Corporation Strategic Business Plans term paper 42344

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Introduction

Able Corporation is an old family owned American Manufacturer of a full range of portable electric power tools (PEPT). Over the past couple of years, there has been virtually no investment in Able Corporation, hence the stale and outdated product lines. Under the current operations, they are inefficient and costly due to location and old and unmaintained plant in unionized areas. Walden, a conglomerate, will be acquiring Able Corporation and together with it, are its own strategic plans.

Mission Statement

Able Corporation will design, develop, manufacture, and market portable electronic power tools (PEPT) of highest quality and reliability for professional and consumer end users. It shall identify the needs of the customers, surpass those needs, and provide quality tools and products that will make the work of craftsmen easier, by using state-of-the-art technologies, sophisticated tool and techniques, and concurrent engineering.

Operating Principles

Our operating principles are pervasive. They will be reflected in the strategic plans of the organization and also in the individual performance of its managers and employees.

Budget and Financial Management

Budget development, justification, and execution will be executed with openness and honesty. Preparation time and expense of developing budgets will be minimized without compromise to quality analysis. Each department will be provided with the budgets, program analysis, and other information required for a sound program execution.

Continuous Improvement

Commitment to promoting excellence and continually improving processes, products, and services to better satisfy customers� needs and requirements will be demonstrated always.

Environmental Stewardship ��.We will conduct all of our activities with high regard to our environmental responsibilities.

Ethics and Standards of Conduct ��..Able will promote an environment, which adheres to the fundamental ethical principles and compliance with related laws and regulations. World Class Management ��.Manage changing environment with flexibility, making timely decisions and developing and executing effective strategies. Employee Empowerment ��.Provide relevant trainings and encourage staff to challenge status quo and embrace creative approaches. Brand Recognition/Promise ��.Place high value on being trusted, reliable, and respected.

Market Analysis

Target Customers

The target customers for Able are the following:

� Do-It-Yourself homemakers

� Construction and Remodeling Workers

� Motor Vehicle Repairmen

� Companies engaged in Production of Industrial Machinery

� Professional Craftsmen

Market Characteristics and Trends

There a number of trends that are converging to make Able a lucrative business.

� More houses on renovation

� Rising demand for cordless tools

� People relying on doing their own

� Professional users and avid DIYers are often willing to pay a premium for improved tool performance.

� The consumer market will shift somewhat in favor of more powerful and expensive tools as DIYers and hobbyist seek professional-grade equipment.

� Demands for higher productivity in jobsites, which can be achieved through power tools usage.

Market Size and Revenue Potential

In an industry study by a research firm Freedonia, World Power Tools (2007), US forecast to 2009 and 2014 power and hand tools demand will exceed $15B. US demand for power and hand tools is forecasted to increase over three percent per annum (including price increases) to $15.1B in 2009. Advances will result from upgrades to more powerful, high-end power tools, and by the continuing diffusion of cordless products. Growth will fail to match the 1999-2004 pace due to decelerating construction expenditures, which will limit gains in the construction market for tools. Accelerating growth in manufacturing output will boost advances in the professional sector.

In the global market, North America and Western Europe will have the highest demands for power tools. Figure 1 shows the distribution of power tools demand per region.

Figure 1: Demand Distribution

Competition

According to Deneen and Gross (2006), the market leaders, Black and Decker, Bosch, Tech Tone, Makita, and Hitachi, will account for 37% of the market. The rest of the players will account for Sixty-three percent.

Market Leaders 37%

Black & Decker 12%

Bosch 9%

Tech Tone 7%

Makita 5%

Hitachi 4%

Others 63%

Figure 2: Market Share of Leading Producers

Company Strengths and Weaknesses Analysis

Strengths

��Able Corporation's strengths are but a few compared to its weaknesses. Able Corporation serves both consumer and industrial channels which are the main consumer channels. One of its products, the circular saw dominates the market with 40% share and has very strong brand equity and loyalty among both professionals and consumers. Able is also successful in the cordless segment and always a pioneer in the new designs which are welcomed by consumers.

Weaknesses

��.One of Able�s weaknesses is its lack of market intelligence. They do not know their customers nor they know their competitors. Able Corporation�s customers perceived their tools as low to moderate. There has been inconsistent internal information between all of the departments since senior management can't seem to get along. Employees have low morale for fear of losing their jobs because of the acquisition. Manufacturing plants have been placed in unionized areas which have led to inefficient and costly operations. The plants are old and have not been maintained for quite some time. Product lines are stale and outdated since Able has not invested in the marketing department. On top of this the company is in a precarious financial situation with their losses for the past two years.

Opportunities

��.Construction workers and DIYers are in need of cordless power tools. There is a need for quicker accomplishments of projects, hence the demand. Able Corporation has filled this need by providing a huge selection of cordless tools. There is a huge need for these cordless tools that offer improved battery technology. It is projected that there will be 10% growth in cordless segment and will further increase when battery technology is improved. It follows then, that there is an opportunity for growth increase in the consumer channel.

Threats

��.The industrial channel has been declining at 5% per year for five consecutive years. There have been rumors of interest rates increasing. According to the U.S. Census, new housing developments are down compared to last year.

Strategic Objectives

One Year

� Analysis of Current Company Performance/Situation

� Invest on Market Intelligence

� Establish Success and Performance Metrics

Five Year

� Improved customer service

� Improved operational efficiency

� Create a compelling value proposition for its customers

� Build strong brand/quality recognition

� Benchmark with competition and improve marketing tactics

� Build an elite team of executives and industry professionals

� Design and develop new products and services

Ten Year

� Be the market leader setting the industry standard

� The reinvesting of funds from R&D to the marketing department.

� To expand the business share aggressively and offer above-average returns to shareholder

� To become the leading, innovative power tool company within corded and cordless segment

Forecasts

"There are four direct general economic indices that are used to forecast the sales of the PEPT (Portable Electric Power Tools) Industry in which Able Corporation operates. These are housing starts, expenditures for residential construction, expenditures for commercial construction, and expenditures for home repairs and improvement." (Task List, n.d.) The following data from U.S. Census for housing starts which shows that the housing sector has been in a deep recession. Fortunately, there are now some signs that the rate of decline is slowing, and even that some stabilization is occurring.

Figure 3:Housing Starts

Expenditures for residential construction are on a decline from 2001 to 2005. This means that residents are not building new homes, which means either commercial construction has risen or homeowners are preferred remodeling and improving their existing homes. In 2001, new residential construction expenditures were at $4,128,625.00, $5,131,239.00 in 2002, $5,779,916.00 in 2003, $6,850,612.00 in 2004, and $2,013,598.00 in 2005.

Expenditures for commercial construction have been on the rise since 2001. Commercial construction expenditures for 2001 were at $5,109,318.00. $5,390,298.00 in 2002, $5,327,336.00 in 2003, $5,537,480.00 in 2004, and $5,915,031.00 in 2005.

According to Realtor.com, home sales have been decreasing since July of 2006. As you can see from the succeeding data, homeowners are re-modeling their existing homes instead of purchasing new homes. Residential improvement and repairs was at $629,301,000.00 in 2001, $691,702,000.00 in 2002, $709,003,000.00 in 2003,. $796,104,000.00 in 2004, and $862,805,000.00 in 2005.

Financial and Operational Objectives

� Achieve operational efficiency

� Maximize Utilization of Resources

� Achieve sales of $3B million by 2020

� Report annualized profits of $xx million in 200X

� Secure 20% market share in 2020

� Improve Revenue-Debt Ratio

� Improve Margins

Conclusion

Able Corporation is a losing company but with an aggresive overhaul in its culture, commitment to operational efficiency and product quality, renewed marketing tactics, additional investment in research and development, market intelligence and competitive analysis, it will soon be one of the powerhouses in the industry. The current market trend shows that there is a decrease in the purchasing of new homes and that consumer behavior is more inclined to refurbishment and remodeling of their homes. Therefore, Able Corporation should target the do it yourselfers more so than the commercial industry.

References

Deneen, M., & Gross, A.C., (2006). The Global Market for Power Tools. Retrieved August 8, 2008, from http://www.accessmylibrary.com/comsite5/bin/aml2006

Task List. Retrieved August 7,2008, from Colorado Technical University Online Web site: http://MainFrame.aspx?ContentFrame=/Default.aspx

U.S. Census Bureau, (n.d.), Construction Statistics, Retrieved August 8,2008, from http://www.census.gov/const/www/

U.S. Department of Housing and Urban Development, (n.d.), U.S. Housing Market Condition., Retrieved August 8, 2008, from http://www.huduser.org/periodicals/ushmc.

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