Business is a dynamic field, (education 1951) where things change fast way. If some company makes mistake in its decisions either brief conditions or long conditions it will always be on losing part, and sometimes there is no come back from a dog position in a strong market. In cases like this analysis we will understand how process models and other tools help analyze the situation of any business and exactly how companies can effectively use these analysis tools to help them in bad situation as in cases like this analysis Bentley Security Company is facing.
For responding to the three questions of the case study we will go into analysis of the situation using by use of process model research, porter five analyses and SWOT analysis, while answering to first question. We will also examine through the research of corporate funding, extension matrix for company, its product life pattern, its product setting, its value string and its own competitive position. For responding to second question we will analyze why company was neglect to realize its core competency related to its value productions. In last question we will answer evaluate the expected future gains as said by the CEO of the business that if indeed they will manage to overcoming the issue of bargain price, come back over equity, rising bad debts, changing security Inc into earnings generating element of business and by getting the self-assurance of the marketplace.
In the finish we will conclude the analysis and will conclude towards some concrete learning end result, which is often useful in real business situations which we can face as business strategist dealing with any company. We will have how any company which facing problems like Bentley Security, can make good tactical choices?
1. 1 Track record of the study:
Bentley is a Security Company that is trading in Gotham City for twenty five years. Just lately, the older management team achieved to review improvement.
Finance Director: I am concerned about our recent financial performance and it appears to me that we are at risk of being taken over at a bargain price. Our return on owner's collateral is 2% below the industry average and we've a large arrears due to the leverage purchase of Security Services Inc. What we should can do to boost our financial results as soon as possible and, at the same time, convince the market that we have a long term feasible future?
Marketing Administrator: In my own view we have an excellent profile and our problem are due mainly to poor cost control. We progressed from our foundation in producing domestic alarm systems into commercial systems and then received Security Services Inc - which provides guard watching services for commercial premises - that capitalized on our main skills at each level. We chosen into diversify because the home market was saturated and there were large rises in the amount of suppliers since it is now an easy business to find yourself in as the technology is becoming standardized. The commercial sector was growing because of the current economic growth; but we've been caught at 12% market talk about in the commercial systems market and while Security Services Inc got over 300 service contracts when we bought it, we have not yet been able to draw in any clients.
Human Resource Administrator: I should point out that I find it difficult coping with security employees and this could be one reason for the fact that we don't make much revenue on the security contracts.
CEO: If we talk about the brief and permanent issues talked about by the fund director, then we will remove the motivation for anyone to adopt us over. But in the meantime, we have to investigate the opportunity of starting a management buy-out (MBO).
Issues:
Others companies have competing price
Finance situation is poor
2% less revenue /dividends on investor's equity
Increasing debt
Poor cost control
Increasing saturation in home market
Growing new rivals
No new customer for security Inc
Poor performance of security staff
Turning point:
Before acquisition of Security Inc Bentley was doing well in alarms development, after acquisition of this company things went poor as Bentley was unable to win clients.
Accounts issues:
More expenditures at corporate HQ
More interest obligations on debts
Effective use of product development
Less costs on marketing
Control of cashflow that is negative
Control of loaning
Commercial alarms and security Inc required improvement
Product development required as more expenses and attentions on guarantee demands
Price is far less than market in commercial security alarm its 500 as compare to 600 and in security personal its 17000 as compare to 20000 per annum
Plus Tips:
25 years of experience
Good performance in home and commercial alarm productions
Targets:
New focuses on that will make Bentley again in growth can be its financial goals of increasing the profits and reduced amount of debts and other costs.
Further it also required to win investor self-assurance over its performance on the market.
Suggestions by CEO:
Removal of bonuses for competitors
Management buy-out
2 Question One:
Use tactical models to recognize the actions the management team might take to deal with Bentley's short-term and long-term problems.
2 Answer:
Bentley is an excellent research study to see how a business that was making improvement in last 25 years suddenly started out a drop that brought management to sit down and analyze the situation before it is too past due. To make a better analysis of situation and get solutions for Bentley's short term and long-term problems we need to make pursuing analysis
2. 1 Corporate Finance
As the analysis shows that Bentley is experiencing financial problems. So, Bentley management required urgent attention and for that there can be few short term and other permanent strategies to control over the finance issues.
Short Term Options:
Bentley should make right sizing at its mind quarter as it has extra staffing on its head office.
It should stop debts as its priced at more on repayments.
Bentley should change more on marketing their alarms.
Long Term Choices
Bentley should get more investment than loan by producing its market position.
It should put some money on product development.
It should put money on marketing.
It should invest more on its individuals reference to get skilled staff for security Inc.
It should utilize its investments and inventories more into security alarm production.
Expansion matrix
Ansoff's Product and Market Matrix
Figure 1: Ansoff Matrix
Market Penetration:
As it is the strength of the Bentley they need to try to recapture and get benefit of the existing market by promoting their local alarms and commercial alarms and make an effort to get some repositioning of the brand.
Market penetration for Bentley required covering of the four main aims:
Maintain or increase the market talk about of current products - this can be achieved by a combo of competitive rates strategies, advertising, sales advertising and perhaps more resources dedicated to personal selling
Increase usage by existing customers. For instance by introducing commitment schemes.
Market Development:
They can also go for new marketplaces with the prevailing product range in these new markets. This means that the merchandise will remains the same, but it is marketed to a new customers. Exporting the merchandise, or marketing it in a new region.
There are many possible ways of approaching this strategy, including:
New geographical markets; for example exporting the merchandise to a fresh country
New product sizes or product packaging: for example, New syndication channels
New pricing procedures to get different customers or create new market segment
Product Development:
This is a fresh product to be marketed to existing customers. Here they can develop and innovate new product offerings to displace existing ones. Such products are then marketed to your existing customers.
Diversification:
Bentley can go for the diversification that can be sectioned off into horizontal and vertical.
The horizontal diversification is the addition into the production program like new kind of alarms.
The vertical diversification is at the sales level where company must store products regarding to demand.
Product Life Cycle
If we compare the two alarms developed by the Bentley we will get these products are on maturity level and considering a drop as Bentley neglect to keep the advancement accordingly. They need more work to bring development changes and effectiveness of the merchandise to allow them to put the product back again on its development.
Figure 2: Bentley product life cycle
Similarly their door supervisors company or security Inc is complete in decline as they neglect to generate new customers and today form here it appears total dog stage in a market. Still they can either decide to keep it or they can go back to their key competencies of security alarm production. If indeed they want to keep it they need to redesign the individuals source management which is totally fail to produce any effect since they purchased this company.
Figure 3: PLC possibility for Bentley
2. 4 Value Chain
We can better understand the activities of Bentley through it developed a competitive advantages and create shareholder value with a value chain analysis. In his 1985 booklet Competitive Advantages, Michael Porter introduced a universal value chain model (M. E. Porter 1998) that includes a series of activities found to be common to a wide range of firms.
The goal of these actions is to put forward to the customer a value of product that exceeds the expense of the process, and easily earns a profit percentage.
As it can be analyze in value chain model that Bentley have some key competencies and the actions where it can follow a competitive gain as follows:
Cost benefits: by better understanding costs and squeezing them out of the value-adding activities.
Differentiation: by concentrating on those activities associated with main competencies and functions in order to execute them better than do competitors.
Cost Advantage
A organization may make a cost benefits either by minimizing the expense of individual value string activities or by reconfiguring the value string. As Porter recognized ten cost motorists related to value chain activities, So Bentley can proceed through each and seek what's workable for the kids in this process:
Economies of scale in development of alarms
Capacity utilization that's in security alarm production
Linkages among activities at the company
Interrelationships among sections by aligning security inc with security alarm business
Institutional factors must be handled especially in security Inc(rules, union activity, taxes, etc. )
At Bentley cost edge also can be pursued by reconfiguring the worthiness string. Reconfiguration means structural changes such a fresh production process, new distribution channels, or an alternative sales approach. For example, FedEx structurally redefined express freight service by acquiring its own planes and applying a hub and spoke system. (Fedex 1995-2000)
Differentiation
Bentley can perform a differentiation gain either by moving individual value chain actions to add to distinctiveness in its alarms or it can obtain it by reconfiguring the worthiness chain.
It can go into forward integration to be able to carry out some functions which were performed by its customers like categorization of its security alarm systems and models relating to customers need. It could adopt a backward integrate to manage over its inputs. It can put into action new process technology or start using a new supply route.
Technology
Because technology is in use to some extent atlanta divorce attorneys value creating action, changes in technology can bring competitive benefits.
Bentley is using various solutions in both main activities and support activities as its listed below:
Inbound Logistics Technologies
Transportation of materials
Material handling inside development place
Material storage at stores
Operations Technologies
Process of production
Machine tools used for production and handling
Packaging of the alarms
Maintenance of finished goods
Testing of alarms
Building design & operation
Outbound Logistics Technologies
Transportation of alarms source to supply stores
Material managing inside stores
Packaging for supply
Communications between all departments involved
Marketing and Sales Technologies
Media utilization ( Printing/electronic/Audio/video)
Communications
Service Technologies
Testing
Communications
Linkages of Activities
Bentley can redesign the alarms for with different patterns and features for different customers. In this manner even it can reduce creation costs. If it's have the ability to reduce cost in one activity and therefore benefit from a cost reduction in another, from a design change and effectively reduces creation costs looked after further improves because of this costs lowering. Thus it can such improvements the firm gets the potential to build up a competitive benefits.
Business Systems Interrelationships
Tangible interrelationships offer immediate opportunities to create a synergy among business units. For instance, Bentley can make its multiple models share whatever it's possible among the business units to talk about for cost lowering. This posting of the procurement activity can result in cost lowering.
Outsourcing
To decide which activities to outsource, managers of Bentley must understand the firm's advantages and weaknesses in each activity, both in conditions of cost and capacity to distinguish. Managers may consider the following things when choosing activities to outsource.
Competitive position
Bentley has good history of twenty five years in security alarm business. It really is one of good company in market. After it tried out to increase its business into security provision (door supervisors) it facing more problem as this new acquisition is not doing well. If we tightly examine the investment situation it still putting les s on alarm business and getting more compare to its security personals business. Company is reselling all its products on fair price as compare to market even if they decide to raise price in all precuts still they may have benefits over their competitors on the market. They can easily attract customers on this pricing benefit and by creating new technology in developing or deals they can still come back into competitive position on the market.
3 Question Two:
Is the CEO appropriate to conclude these activities will remove all motivation for another company to dominate Bentley?
3 Answer:
3. 1 Porter Five Research of Company
In his book Competitive Strategy, Harvard professor Michael Porter identifies five forces impacting the profitability of companies. (Porter 1998) These five makes, taken together, give us understanding into a company's competitive position, and its own profitability.
Rivals
For Bentley rival is competitor within industry, this rivalry on the market is high for Bentley. As these rivals are fighting with Bentley over following factors:-
Quantity of rivals in market
Fixed costs
Product differentiation
New Entrants
One of the defining characteristics of competitive advantages is the industry's barrier to entry. In security industry its very low for each one starting security organization as there are many barriers from government and its own security regulating companies. Bentley can enjoy benefits associated with common barriers to entry:
Patents - branded technology can be a huge barrier avoiding other organizations from joining the marketplace.
High cost of access - the more you will be charged to get started within an industry the higher the barrier to access.
Brand commitment - As Bentley is market since 25 years its definatley have some well worth related to its products specially its alarm systems.
Substitute Products
Bently should look keenly for what the company's other competitors are doing, and how many other types of products are available in the market as there is certainly improvement in technology so there may be high risk from others rivals for Bentley. As is the case dealing with new entrants, company can get into an aggressively price to its products to keep folks from switching.
Buyer Power
There are two types of buyer electric power. The foremost is related to the customer's price awareness. The other kind of buyer power relates to negotiating vitality. Conversely, in case a company sells to some large buyers, those customers will have significant leverage to negotiate better prices.
Some factors affecting buyer electric power are:
Size of buyer
Volume of buyers
Purchase quantity
Bentley have gain in its price and durability of products it have less potential buyers ability broblem.
Supplier Power
When multiple suppliers are producing a commoditized product, the company can make its purchase decision based mostly mainly on price, which will lower costs. Alternatively, if a single company is producing something the business has to have, the company will have little leverage to make a deal a much better price. Here for Bentley things are advantageous with less suppliers electric power as they hinge less over the recycleables.
A few factors that determine supplier power include:
Supplier
Turning costs
Uniqueness of product
4 Question Three:
If the team determines on MBO, how much should they anticipate to pay?
4 Answer:
4. 1 Management Buyouts (MBOs)
A management buyout MBO is the purchase of a small business by its management.
Some time owners or the shareholders of any business want to market the shares of the business enterprise or company. For your they give possibility to the prevailing management to buy the business. As they know the details of the business and are in a strong position both to worth it and also run it. One can assume that they can make good effort for themselves than for other folks.
A management buyout is a exceptional part of business apt to be a great test of any company and its own management's skills in business. Bentley can sell its security Inc as its not undertaking well and adding problem for the business. For a successful MBO Bentley team may require to focus on some pre MBO set up. They not simply secure their own money and career, nevertheless they have showing that they have the eye-sight and proper potential to improve their organization also to deliver better result as results. Another necessity is their passion and dedication to convince the management who will buy it that their MBO will continue to work. There are next procedures that necessary to be implemented for a successful MBO.
Decision to proceed
Managers as shareholders will be eager to invest in Bentley with predictions that offer the chances of gaining the gains they will make investments for. As potential earnings maybe higher than current results because people in new set up will continue to work harder. An understanding of the factors influencing Bentley can help to set forward actions properly.
Business plan
MBOs are usually highly geared, therefore the Bentley must be able to produce cash and success for a while. They could have tactics which are practical in the long term, though it'll be tricky to make sure the traders among management that their future is on growth side.
Form the management team
A very significant part of a successful MBO is to put a management team which has a high-quality record. Possible investors will like to learn how they can make modifications in than the present team. Bentley must therefore put a clear deliberate plan for the business enterprise.
Arranging the funding
Valuing Bentley Company is sophisticated matter and here's no set rule. Whatever investor gives that will be relate to many things. Those will be the balance sheet and current profits. The future potential of the business will be vital but sometimes want of the present owners to sell can make a difference.
Agreeing terms
The financing for an MBO normally are the decision-making board and its particular interest, its collateral and arrears position. Different management shareholders will be looking for diverse dividends from this deal, platform on the assumed risk they will be taking.
Deal co-ordination
There can be no collection rule for the management to get in to the management buyout. Still, they'll require displaying the promise to the company by creation a significant asset of their money, although there can be a massive stress resting on the time and skills.
Completion
Negotiating for buyout is not always very simple, as there exists some matter of unsatisfactory present relationships as company is certainly going for MBO. Some management buyout clubs can pretense their advisers to adopt opening move toward success. A speak to buy any business is usually a complicated activity, and there is simple fact that seller has vital test. The information contain in the factsheets must never be relied lying on top.
5 Final result of Study:
We can see that Bentley was managing alarm systems offering effectively but after implementing the security organization it gone into many problems. Now it's important for them to get one of these successful management buy-out for your, which will make such arrangements that will help it to get maximum future investment to repay its problems related to other products.
Furthermore they can go for a right sizing and downsizing to control the distance of bills and profits. This way Bentley can go back to its profit position as it was in recent before version of the security firm.
