Objectives to introduce
1. A situational audit
2. Analysis of strategic issues
3. Analysis of change management challenges faced by management
4. Critical appraisal of the consulting activities
Objectives to introduce
Kingsholm Polymer Systems (KPS), a tape producing company, is located in the UK. It consists of three different sites: the paper masking tape faculty, a pvc tape producing faculty, and a cable jointing faculty. For KPS is in the producing and processing industry, the company acts as supplier to main customers such as electronic wholesalers, electronic cable manufacturers, do-it-yourself stores (DIY), and the automotive industry. 450 members of staff are currently employed at KPS.
The challenge KPS has to approach is to bring a new product, the so called Haltadon, to market. By doing so, KPS seeks to achieve a better market position, increase sales, enhance market share and better return on investments (RoI). To cut it short: great expectations concerning improved profitability and reduced costs focus on the desired product launch, an undertaking coming along with certain defiance:
- KPS does have a numerous amount of technical experts but the products do not always meet customer`s expectations.
- KPS does have sales and finance employees but to analyze which clients and products bring value to the company has not been possible yet
- Some of their products are more innovative than those of rivals but because KPS lacks patent protection, innovations soon become commodity and prices decrease.
- KPS has made it to involve up-to-date cultural aspects but internal disparities especially concerning the HR aspect lead to unsatisfied employees.
- KPS missed access to low priced raw materials which makes it hard to compete with rivals and sustain high margins.
Internal and external defiance mentioned above show that KPS offers some potential - even though the company is struggling at the moment. That underlying potential is the issue which is now to be developed through a situational audit, a strategic analysis, and an implementation of change management activities. An appraisal of recommended consulting activities will be done to support the analysis.
1. A situational audit
Before getting into a complex analysis why KPS might or might not attain with the strategy succeeding at the moment, a situational audit is needed. Following, the so called seven-s-model (Pascale and Athos, 1981; Peters and Waterman, 1982) is chosen to bring the internal status quo on the agenda. Weaknesses of KPS examined through this model will be further discussed by using the fishbone model (Ishikawa, 1990). Therefore, concealed lacks in innovation processing will be highlighted.
Regarding the structural aspect of KPS three factories dominate the setting. The cable jointing factory is the oldest factory and might therefore be seen as core factory. Products are sold to large UK cable manufacturers. The pvc producing factory provides products sold to electrical wholesalers and car manufacturers. Factory III, the paper masking factory, sells its products to car industries as well as to DIYs. Each factory has its own manager responsible for manufacturing the entire product range. Above all employees stands Geoff Kite, CEO of KPS. What at the first sight seems like a conjunction of independent factories already offers two main aspects that combine the three sites: they have a common warehouse and a shared distribution system. What stands out - besides the logistic system - is the fact that there is no other IT system mentioned which would support financial analysis and knowledge transfer. Regarding the strategy, KPS currently seems to be “stuck in the middle”. The company is too small to be mass leader or act as “one stop shop” but offers too few innovations to be quality leader.
Concerning employee`s skills, staff members seem to be technically well-educated: they partly managed to be more innovative than their competitors and proved tactical thinking e.g. by getting US license. The problem is: launches come too late or do not assure sustain return flows. Regarding the staff, employees seem loyal, mainly comfortable with what has been done over decades, and routine blinded. Particularly in factory 2 (pvc) employees seek for change, as expressed in the appraisal system they established.
Regarding the managing style, KPS follows a power culture, which may be ingrained by earlier owner driven period. One manager for each factory, competitive thinking, low interaction, and the powerful CEO on top - all those are indices supporting a power culture. Following challenges occur out of hard and soft facts mentioned so far:
1. KPS lacks interaction and synergies between the three sites. Even though sites are maximum 15 minutes apart, cross-functional meetings are held in ad-hoc meetings only. Heads of faculties seem to compete rather than supporting and learning from each other.
2. The logistic system is not efficiency-improving. In fact, each faculty holds its products in repositories as well. Additionally, as long as IT programs do not offer an analysis of which clients and products significantly add value to KPS, the IT system only offers half of what is needed.
3. The strategy is not clearly developed. KPS misses important aspects to improve RoI because of huge lack in formulating and transmitting vision and action. 4. There is no facilitation of people’s skills to create new ideas. Know-how in bringing products to market is lacking.
5. Staff is not used to change and therefore is delimited in flexibility when change is wanted or needed to sustain business.
6. Power culture supports competitive thinking and less interrelation between sites. Nevertheless, when profitability must improve, cross-functional thinking is unconditional.
Identified aspects such as low synergies, missing IT components, no clear positioning, lacks in facilitating innovations, low flexibility, and no achievement culture accompany clearly why KPS has difficulties in bringing Haltadon to market. To point out what barriers mostly hinder the ability of “commercial launching”, the fishbone framework has been used.
Main input reasons for poor innovation process are shown above. They are to be converted significantly if innovation turns out to be the desired customer value proposition (further discussed in section 2).
For analyzing further external challenges, the industry discussed further on has been defined as “UK industrial tape industry”. By using Porters` Five Forces Framework (Porter, 2008) it is possible to point out how high the threat to profitability in that industry and - to some extend - how attractive the chosen industry is. According to the threat of profitability through buyers, suppliers, possible new entrants, substitutes, and industry rivalry itself the threat to profitability is relatively high in the UK industrial tape industry. Low profitability can be ascribed to low product differentiation and relatively high concentration of buyers compared to producers. Therefore, industrial buyers such as car manufacturers and electric wholesalers are in a comfortable position whilst price negotiation puts high pressure on profitability for suppliers like KPS. Because of high costs of input products purchased by sub-suppliers as well as high concentration on the sub-suppliers’ side, suppliers` power is high as well. That lowers available margins additionally. For possible new entrants medium capital requirements is needed though but because product differentiation is relatively low and access to distribution channels is easily given, the possibility to compete with new entrants e.g. from Far East is intensively high. Hence, threat to profitability from new entrants is high, too. What stands out is low threat to profitability through substitutes. Besides tapes ribbons, straps, or mucilage are only poor substitutes for jointing cables and masking surfaces professionally. Unfortunately, rivalry in the UK industrial tape industry is high. High concentration of competitors from the US or Europe are mainly responsible for relatively low margins over all. The five aspects of Porter`s industry analysis are shown in detail below.
To broaden the mainly economic view on the industry, the PEST LE (Pierce, 2001; Grundy, 2006) framework is used in the following. The wider perspective including also political, social, technical, legal, and ecological aspects, offers an interesting turning point regarding the provoking results so far: the external environment turns out to be quiet stable. Neither political nor legal impacts would change the tape industry entirely. Investments can therefore be planned in long-term perspective, changes will not affect the business surrounding entirely like political decisions affected the atomic energy, legal denouements affected smoking industry, or social trends affected genetically modified food suppliers. Nevertheless, there are some aspects that should definitely be taken into consideration before leading over to strategic issues.
- Quote paper
- Elisabeth Felice Nehls (Author), 2010, Management Consultancy, Munich, GRIN Verlag, https://www.grin.com/document/175228