Developing The British Extraction Technology Market - Strategic Analysis and Concept for ESTA

D I S S E R T A T I O N

T h o m a s D r a b n e r

S t r a t e g i c A n a l y s i s a n d C o n c e p t f o r

E S T A G m b H & C o . K G

Developing the British Extraction Technology Market

Thomas  Drabner Thomas  NA

Contents   NA

Figures   NA

Abbreviations   NA

1  Introduction  1

1.1  Problem Definition  2

1.2  Objective  2

1.3  Methodical Approach  3

1.4  Definitions Explanations  3

2  Theoretical Framework  6

2.1  Basics  6

2.2  Fundamental Elements  8

2.3  Integrated Strategic Planning An Illustration  9

3  The Market Development Process  10

3.1  Targets  10

3.2  The British Market Macro Surroundings  10

3.3  The Extraction Technology Branch Micro Surroundings  15

3.4  ESTA Characterisation  20

3.5  SWOT Profile An Interim Conclusion  25

3.6  Strategy Selection Theory and Classification  26

3.7  Marketing Planning Basic Considerations for Implementation  32

4  Conclusion  42

Appendix   43

Bibliography   54

Developing the British Extraction Technology Market

Thomas  Drabner Thomas  NA

1  Introduction  1

1.1  Problem Definition  2

1.2  Objective  2

1.3  Methodical Approach  3

1.4  Definitions Explanations  3

2  Theoretical Framework  6

2.1  Basics  6

2.2  Fundamental Elements  8

2.3  Integrated Strategic Planning An Illustration  9

3  The Market Development Process  10

3.1  Targets  10

3.2  The British Market Macro Surroundings  10

3.2.1  Market Characteristics  11

3.2.2  Politics  13

3.2.3  Regulations Standards  13

3.2.4  Industry  14

3.3  The Extraction Technology Branch Micro Surroundings  15

3.3.1  Market Size Demand  16

3.3.2  Authorities Affecting Demand  17

3.3.3  Competitive Surroundings  18

3.3.4  Existing Distribution Standards  19

3.4  ESTA Characterisation  20

3.4.1  Company Profile  20

3.4.2  Products  22

3.4.3  Current Activities within the UK Market  24

3.5  SWOT Profile An Interim Conclusion  25

Developing the British Extraction Technology Market

Thomas  Drabner Thomas  NA

3.6  Strategy Selection Theory and Classification  26

3.6.1  Corporate Level  26

3.6.2  Business Unit Level  27

3.6.2.1  Generic Business Strategies  27

3.6.2.2  ESTA s Business Strategy Domestic and Abroad  28

3.6.3  Functional Level  29

3.6.3.1  Basic Marketing Strategy  29

3.6.3.2  The Marketing Strategy Path For ESTA  31

3.7  Marketing Planning Basic Considerations for Implementation  32

3.7.1  Identifying Market Segments and Target Customers  33

3.7.2  Formulating Product Strategy  34

3.7.3  Setting Price Range  35

3.7.4  Establishing Distribution  36

3.7.4.1  Finding Selecting Potential Sales Partners  37

3.7.4.2  Establishing Relationship  39

3.7.5  Promoting the Development  40

3.7.6  Short Term Schedule Budget Estimation  41

4  Conclusion  42

Developing the British Extraction Technology Market

Thomas  Drabner Thomas  NA

Figure  UK Indicators  4

Figure  The Integrated Planning Process  9

Figure  UK Economic Indicators  11

Figure  GDP Growth Rate  12

Figure  UK s major trade partners  13

Figure  Sales by Product Type  16

Figure  Export Products  23

Figure  SWOT Profile  25

Figure  Options for Basic Marketing Strategy  32

Developing the British Extraction Technology Market Thomas Drabner V

Abbreviations

approx. approximately

AHK Foreign Chamber of Commerce (Außenhandelskammer)

bfai Bundesstelle für Auslandsinformationen

BGCIC British German Chamber of Industry & Commerce

CBI Commerce-Business-Industry

COSHH Control of Substances Hazardous to Health

cp. compare

e.g. for example

et sqq. following

EU European Union

EUR EURO

GBP Great Britain Pound

GDP Gross Domestic Product

HSE Health & Safety Executive

HR Human Resource

IT Information Technology

Mill. Million

MSI Market Strategy for Industry

OEM Original Equipment Manufacturer

R&D Research & Development

SME Small – and Medium Sized Enterprise

TÜV Technischer Überwachungsverein

UK United Kingdom

US United States

VAT Value Added Tax

VDMA Verband Deutscher Maschinen – und Anlagenbauer

Developing the British Extraction Technology Market Thomas Drabner 1 1 Introduction

The globalization of today’s market place has been subject to great attention. Whether or not a company participates directly in international business, hardly anyone can claim not to be involved in any way in the global market place. In fact, due to saturation tendencies in the domestic market, the dependency on international customers as well as the ever increasing pace of global competition, nearly all companies of any size and business level are faced with the impacts of the world market. 1 Their performance, however, differs significantly. Especially for SMEs foreign expansion is the main challenge; minor foreign market knowledge, inexperienced staff and the dependency on day-to-day operations limit the possibilities for a systematic approach to foreign markets. 2

In the literature of international marketing and management there is a variety of theoretical approaches concerning the process of internationalisation respectively the entry into foreign markets as well as market development. However, in many cases especially Small and Medium Sized Enterprises (SMEs) fail to interpret the theoretical approaches according to their needs and thus are confronted with a considerable gap between theory and their business reality. 3

Being employed in a SME myself missing strategic planning and emotional decision-making has indeed been a part of my work experience during my co- operative studies. In my company I am now responsible as Area Sales Manager for the Scandinavian region, Austria and the United Kingdom and it will be my task to correlate the indications of theory with the necessities of the specific internal reality of my job assignment. As the company has started to re-organise export activities, the development of the British extraction technology market is a given task and at the same time the subject of my dissertation. 1 cp. Niehoff, Reitz (2001:35 et sqq.) 2 cp. Perau R., Boving D. (2000:11) 3 cp. Holland (1997: 1 et sqq.)

Developing the British Extraction Technology Market Thomas Drabner 2 1.1 Problem Definition

“Due to the increasing competition the long-term continuity of companies depends on a conceptual approach on international markets. It can not be the aim to be involved in as many international markets as possible without any strategic basis. Furthermore, it is not enough to trust on coincidence in searching for international partners or the general international opportunity. Instead, there has to be a clear target and reasonable steps to reach it.” 4

In general, the previous statement summarises ESTA’s current struggle. The company has managed to export to several countries in the world either directly or by means of independent distributors generally based on random contacts. Initially, this supported the persistent growth of the company and contributed well to its reputation. However, as the competitive structure in the domestic market has increased and sales are threatened the company’s objective is now focused on the international market in order to ensure the ongoing success and growth of the company.

For this reason it has been recognised that random export involvement with no strategic basis is not appropriate for the common goal. Therefore potential markets have been selected for a more focused market development. Among those, building up of the British market is the current priority.

1.2 Objective

The objective of this dissertation is to provide a systematic hands-on approach within market development for ESTA in the British extraction technology market. Relating to major elements of a strategic planning process the emphasis is on investigating external surroundings of the foreign market and correlate them with the internal circumstances of the company. Based on a derivative of a basic market strategy suitable considerations for marketing planning are to be introduced. In particular, this should then relate to how to establish a real presence in the market and outline the basics necessary for this venture. 4 cp. Holland (1997:5)

Developing the British Extraction Technology Market Thomas Drabner 3 1.3 Methodical Approach

This dissertation is divided into four chapters. The first chapter refers to introducing the subject and contains problem formulation, purpose and the corresponding approach as well as essential definitions.

The second chapter focuses on the theoretical framework serving as the basis for the following working process. It reveals major aspects of a strategic planning process and results in an integrated illustration that communicates the interdependency of the individual levels that are referred to in the following main chapter.

Therefore, chapter three is the main focus of this dissertation. It defines the general targets of the market development process (section 3.1) and subsequently analyses external macro and micro surroundings (section 3.2 and 3.3) of the foreign market and characterises the company ESTA (section 3.4). Consequently, the dimensions of external and internal surroundings in accordance to the company circumstances result in a SWOT-Profile (section 3.5). This allows the consideration of a basic market strategy (section 3.6) and derives an actual suggestion on suitable marketing planning for the market development task.

The fourth and last chapter concludes the previous considerations and briefly provides a further perspective.

1.4 Definitions & Explanations

This chapter provides the necessary definitions and explanations of the major terms used in the following pages to ensure a comprehensive understanding. This will be complemented by explanations in the individual sections.

Market Development >>

According to the Ansoff-Matrix that is based on a combination of products and markets the term market development in general refers to selling existing products to new markets.

5 5 Johannsson (2003:262)

Developing the British Extraction Technology Market Thomas Drabner 4 Currency: Great Britain Pound (GBP) Exchange Rate:

1 GBP = 1, 56 EUR,

1 EUR = 0,71322 GBP (05/2003) Voltage: Single Phase 110 V/ Three- Phase 240 V, 50 Hz For the purpose of this dissertation market development also aims at attracting an increasing number of customers in a new foreign market in order to generate cross-border profits based on an existing product line. United Kingdom >> The term "Britain" or “British” is used informally to mean the United Kingdom (UK) of Great Britain and Northern Ireland. The United Kingdom is made up of

England, Scotland, Wales and Northern Ireland. Its full name is the United Kingdom of Great Britain and Northern Ireland. Great Britain is the name given

Developing the British Extraction Technology Market Thomas Drabner 5 Extraction Technology >> For the purpose of this dissertation extraction technology refers to plant and machinery designed to remove dust and fumes from industrial air, polluted during the manufacturing process. The most common extraction devices are as follows 7 :

Filters, which block or impede the movement of particulates, most commonly by fabric filters using the simple concept of passing air streams through a tightly woven fabric bag or cartridge to sieve out any particles contained within the air. Filters are the most common form of extraction and are divided into dust filters for e.g. metal or plastics processing and fume filters for welding and soldering applications.

Cyclones, use centrifugal force to separate particles from gas streams. Wet Separators, operate by collecting particles in liquid droplets. In a whirl- chamber partially filled with water the flue gases accelerate through a converging section. The air and the water are set in motion and the dust is bound to the water as sludge.

ESTA >>

The name of the company refers to its initial product range:

- Elektro – Staub – Absauggeräte (Electric-Dust-Extractors) -

Founded in 1971, the ESTA GmbH & Co. KG is a SME with the business task for developing, designing, manufacturing and selling technical devices to improve work safety and the environment by dust and fume extraction. ESTA is a family business situated in Senden near Ulm. The company takes up an area of about 10,000 m² including administration and manufacturing buildings and employs more than 100 people. In addition to its core business extraction technology the company has a second minor business unit: Swimming Pool Technology 8

. Yet, this paper focuses exclusively on ESTA’s core business: Extraction Technology. 7 cp. MSI (2000:4 et sqq.) 8 cp. ESTA Management Hand Book (2002)

Developing the British Extraction Technology Market Thomas Drabner 6 Strategic Analysis & Concept >>

Strategic Analysis is an element of strategic planning and deals with investigating market and company surroundings in order to derive suitable concepts in terms of business actions. 9

2 Theoretical Framework

2.1 Basics

The development of a specific country market requires a well-defined strategic approach in order to cope with the complexity of the given task. In the literature of international marketing and management this strategic approach has received great attention and is most commonly referred to as the “strategic planning process” 10 . Being relatively new the strategic planning process was first introduced in the early 1970’s in the strategic management education of the Harvard Business School. Ever since, this model has been subject to modification and various authors have made their contributions to the initial thought. However, the common sense in regarding this subject is that strategic planning refers to an information based process that matches external demands with internal potentials in order to ensure ongoing business success. It provides the framework for a disciplined and step by step effort aimed at improving the overall capabilities of the firm to operate in an intensive and dynamic competitive environment.

11 9 cp. Wöhe (2000:135) 10 cp. Hax, Majluf (1996:24) 11 cp. Bea, Haas (2001:49)