A
A. Executive Summary
| |Mission & Vision |Objectives |External |Internal |Recommendation |
|Corporate | |Long Term |Opportunities |Strengths |Blount should expand into new |
| |Blount’s Vision |Financial |Emerging markets provide |Blount holds core |markets geographically as well as|
| | |Strategic |highest growth; industries|expertise in key areas |expand their operations into |
| | |Operating |provide high demand for |of mgmt & manu.; strong |replacement parts for products; |
| | | |new/innovative products; |brand name; Blount |Blount should take initiatives to|
| | | |opportunities to acquire |maintains high |evaluate foreign ex-change risk; |
| | | |related businesses; low |production capacity; key|forward integration into services|
| | | |probability of new |patents give C/A; |in order to balance cyclical |
| | | |entrants; ability to |emphasis on product |behavior in demand; implement an |
| | | |capitalize in competitors |innovation; |extensive information systems for|
| | | |weaknesses; high |manufacturing/ |ordering, purchasing, customer |
| | | |availability of suppliers,|engineering |feedback; and focus more on |
| | | |speed of technology is low|capabilities; strong |advertising and marketing; |
| | | | |distribution/ dealer |Enhance relationships by |
| | | | |network |refocusing on both consumer, as |
| | | | | |well as professional markets, |
| | | | | |placing higher emphasis on |
| | | | | |consumer markets; Blount should |
| | | | | |acquire new businesses that offer|
| | | | | |growth, economies of scale |
| | | | | |/scope, and a balance in |
| | | | | |portfolio risk |
|Business: | | | | | |
|Outdoor Products | | | | | |
|Business: | |Short Term |Threats |Weakness | |
|Industrial /Power | |Financial |Market saturated w/ |Blount has a small | |
|Equip. |Blount’s |Strategic |competitors; growth stage:|customer base; portfolio| |
| | |Operating |late growth/ maturity; |is susceptible to risk | |
| |Mission | |growth rates: low- |of changing demands; | |
| | | |mediocre; products demand |Blount has a weak | |
| | | |is cyclical; exchange |advertising campaign; | |
| | | |rates pose a market risk; |Blount does not offer | |
| | | |low switching costs among |enticing promotions to | |
| | | |product offering; buyers |dealers/ customers; | |
| | | |have bargaining power; |Blount lacks strategic | |
| | | |govern. policies & |alliances that could | |
| | | |regulations may affect |promote the sales of | |
| | | |demand |products. | |
| | | | | | |
| | | | |SWOT ANALYSIS | |
| | | | | | |
| | | |SWOT ANALYSIS | | |
|Business: | | | | | |
|Sporting Equip. | | | | | |
A. Current Situation
• Outdoor Products
• Industrial/Power Equipment
• Sporting Equipment
B. External Factors
• Outdoor Products
• Industrial/Power Equipment
• Sporting Equipment
C. Internal Factors
• Outdoor Products
• Industrial/Power Equipment
• Sporting Equipment
D. Strategies
• Overall Corporate
E. Recommendation/Implementation
• Overall Corporate
F. Evaluation & Control
• Overall Corporate
G. Inquiries from Consultation
• Issues of the Panel
B. Current Situation: Outdoor Products HOME
I. Blount's Current Performance
Outdoor Products Group: The Outdoor Products Group manufactures and markets chain, bars and sprockets for chain saws; concrete cutting products; zero turning radius lawn mowers; lawn mower blades and other lawn care accessories. The Outdoor Group is comprised of three divisions: Oregon Cutting Systems Division, Dixon Industries, and Frederic Manufacturing Corporation. Headquartered in Portland, Oregon, and with five manufacturing facilities throughout the Americas, the Outdoor Group sells to OEM's and to end users through a diverse network of distributors and dealers on in more than 100 countries worldwide. In 1999, the Outdoor Group recorded sales of $327.6 million, which was an increase of 4% in 1998. The Group also seized a record high operating income in the amount of $71.8 million, up 5% from YE 1998.
Oregon: Oregon produces cutting chains, chain-saw guide bars, cutting chain sprockets and maintenance tools for portable gasoline and electric chain saws, and mechanical harvesting equipment. Professional loggers, construction companies, farmers, and homeowners primarily use Oregon's products. In 1999, approximately 13% of the sales by the Outdoor Products segment were to one customer. In addition, severe weather conditions, such as hurricanes, tornadoes, and ice storms, affect the Outdoor Products segments’ business by creating a greater demand for cutting products.
Dixon: Dixon, acquired in 1990, manufactures lawn mowers, and related attachments. Dixon has pioneered the Zero Turning Radius (ZTR) lawnmower, and is the only manufacturer to offer a full line of ZTR lawnmowers to both residential and commercial consumers. The key element, which differentiates Dixon from its competitors, is its unique mechanical transaxle. As a result of this technological innovation, Dixon is able to provide consumers with a higher quality product, and a significant cost advantage over competitors. In 1999, the Dixon lawnmower unit achieved record sales for the 19th straight year with sales of $87.2 million, up 15.2% from 1998 sales of $75.7 million. Dixon's competitors include general lawn mower manufacturers such as MTD, American Yard, and Murray, as well as, Ariens, Snapper and Simplicity.
Frederick: Located in Kansas City, Missouri, Frederick was acquired in January 1997. Frederick is a highly recognized manufacturer of Silver Streak brand accessories for lawn mowers and other outdoor products. Blount management feels that Frederick fits well within the companies operations, and is complemented with outside sales opportunities as a result of Oregon's worldwide distribution outlets. Frederick products compete in a highly fragmented industry where many competitors manufacture replacement products as one part of a larger business. Sales by Dixon and Frederick FYE 1999 accounted for 26% of sales of the Outdoor Products segment, with Frederick replacement lawnmower blade unit sales, and profits, reaching a record high in 1999.
II. Strategic Posture HOME
Blount's Present Mission
Blount strives to be the number one manufacturer of Outdoor Products, Industrial & Power Equipment, and Outdoor Sports Products, throughout the world, while maintaining a balanced portfolio with future acquisitions and mergers that offer substantial growth potential.
Blount's Present Vision HOME
Blount seeks to secure a world leadership position in a manageable number of niche markets, while expanding our international presence; searching for corporate growth opportunities in all of our present markets, and markets we wish to explore in the future.
Objectives
Long-term objectives FYE 2005
Financial HOME
• To exceed $1 billion dollars in sales
• 20% return on average shareholder equity
• 15% average annual growth in revenues and net income
• 35% debt to capital ratio
• 7-10% return on sales after taxes
• 40% sales from international operations
Strategic HOME
• Maintain balanced diversification among businesses and markets
• Seek leadership position in a manageable number of niche markets
• Expand international presence to grow the businesses and protect core markets
• Search for superior growth opportunities within existing business
Operating HOME
• Emphasize innovation and quality
• Focus operating units on customer satisfaction
• Develop new products to meet or exceed our customer's expectations
• Strive for continuous improvements through total quality management
• Empower employees through training and education
Short-term objectives FYE 2002
Financial HOME
• Exceed $890 million in sales
• 18.8% Return on equity w/o merger expense/ 0% w/ merger expense
• $79.69 million in net income: 9.915 million per year @ 15%
• 35% debt to capital ratio
• 7-10% return on sales after taxes
• 4% increase in sales from international operations: 2% per year
Strategic HOME
• Increase customer base in each segment by 6% annually
• Sustain 4.7% increases in market share annually in fragmented businesses
• Expand internationally: 6% increase in international market share w/in fragments
• Increase market share @ 4% in core markets
• Acquire superior growth from within existing business
1. Expand operations into service sector
2. Move into replacement parts-sector
Operating HOME
• Operate at 5-sigma, emphasizing TQM
• Market 30 new products a year per segment
• Increase customer/dealer feedback via information systems
• Increase percentage of educated/trained employees by 10% every year
• Innovate 100 new features for product improvements/development per segment
III. Corporate Governance
Board of Directors
• John M Panettiere, Chairman of the Board/Chief Executive Officer, Blount International Inc, Montgomery, Alabama
• Eliot M Fried, Managing Director, Lehman Brothers, Inc, New York, New York
• E. Daniel James, Senior Vice-President, Lehman Brothers, Inc. New York, New York
• Harold E. Layman, Chief Operating Officer, Blount International, Inc. Montgomery, Alabama
• Alan L Magdovitz, Managing Director, Lehman Brothers, Inc. New York, New York
Corporate Officers
• John M Panettiere, Chairman of the Board/Chief Executive Officer, elected in 1999, joined the company in 1992
• Harold E. Layman, President/Chief Operating Officer, elected in 2000, joined the company in 1993
• Richard H. Irving, III, Senior Vice-President/General Counsel, elected in 1995, Secretary, elected in 1999, joined the company in 1995
• John D. Marshall, Senior Vice-President/Administration and Treasurer, elected in 1999, joined the company in 1993
• Rodney W. Blakenship, Vice-President/Controller, elected in 1997, joined the company in 1972
• Zoe F. Schumaker, Vice-President/Information Systems, elected in 1997
Operations Presidents
• James S. Osterman, President, Outdoor Products Group, elected in 1997, joined the company in 1959
• Gerald W. Bursett, President, Sporting Equipment, elected in 1998, joined the company in 1998
• Donald B. Zorn, President, Industrial and Power Equipment Group, elected in 1997, joined the company in 1994
• Kenneth R. Day, President, Frederick Manufacturing Coup., elected in 1998, joined the company in 1988
• John P Mowder, President, Dixon Industries, Inc, elected in 1996, joined the company in 1976
• Arlin R. Perry, President, Gear Products, Inc, elected in 1997, joined the company in 1997
C. External Factors HOME
I. Societal, Political, Regulatory, & Community Citizenship
II. Industry Competitive Analysis - OUTDOOR
1. Industries Dominant Economic Traits
| |Economic Trait |Strategic Implication |
|Market Size |$3,580,867,000 in industry sales |high competition, new entrants |
|Market Growth Stage |Late Growth in most markets/Geographic areas; |reduce value chain costs, utilize present |
| |greatest potential for growth in South |capacity, emphasize product innovation, enhance |
| |America/Western Europe/Asian markets |present customers/dealers relationships, high |
| | |competition for present market share |
|Market Growth Rate |16.68% |move to markets w/ highest growth POTENTIAL; |
| | |external growth/internal capacity utilization, |
| | |EMPHASIS on innovation; increase product lines |
|Capacity Surplus/Shortage |Capacity SURPLUS |monitor CAPACITY throughout the industry, acquire|
| | |established firms to increase capacity, re-vamp |
| | |value chain/capacity utilization |
|Industry Profitability |Low |Deter new entrants, costs will be an issue in |
| | |terms in terms of value chain process/external |
| | |regulations and policies levied onto product |
| | |price |
|Entry/Exit Barriers |high/high |high capital investments; low chance of new |
| | |entrants; focus on present competition; |
| | |acquisitions/mergers w/i industry; protect |
| | |present market share/position |
|Product Cost |Low - High |PRODUCT offering must meet demands of diverse |
| | |consumer base; low cost may be marketable |
| | |feature, switching costs are low |
|Standard Product |medium |high consumer focus; innovation standards high; |
| | |EMPHASIS on customer/dealer relationships for |
| | |market insight |
|Technological Speed |low |low inventory risk, patents are important, low |
| | |chance of leap-frogging |
|Capital Requirements |high |create barriers to entry, large investment must |
| | |be justified by substantial results, high |
| | |emphasis on capacity UTILIZATION |
|Vertical Integration |partial forward |increased competition for dealer commitment; |
| | |reduction in value chain costs; risk of |
| | |substantial product innovation causing |
| | |manufacturing EQUIPMENT OBSOLESCENCE; must be |
| | |highly receptive to consumer demands |
|Economies of Scale |high |increased competition to gain significant market |
| | |share to maximize scale benefits; exit of firms |
| | |who maintain higher costs |
|Rapid Innovation |medium |innovative features easily matched-low risk of |
| | |OBSOLESCENCE; increased emphasis on patent-able |
| | |innovations; long product life cycles; low |
| | |inventory risk; emphasis in market research |
2. Relative Strength of the Forces that Drive the Industry
| |Strength |Industry Implication |Company Implication |Opportunities |Threats |
|Rivals |strong |high competition = lowers |maintain emphasis in |Market research will increase |Loss of sales due to rival’s |
| | |profit margins & increased |product innovation & |customer relations, brand |lower prices, new |
| | |pressures to lower cost |lowering value chain costs;|loyalty, market insight, and |innovations, higher quality, |
| | |floors, high focus on |focus on market research to|sales (insight) yielding |and TTM |
| | |present CUSTOMERS/ dealers |meet consumer demands |quicker TTM of innovative | |
| | | | |products in fragmented markets | |
|Buyers |strong |high customer focus, |increased market research |gain/maintain market share by |lose market share to |
| | |emphasis on product |to forecast consumer |being the first mover in |competitors who bring |
| | |innovation, lower cost, |demands/tastes/preferences |product innovation, higher |innovative products to the |
| | |high quality; buyer | |quality |market faster, more cost |
| | |BARGAINING power/low | | |COMPETITIVE, and of higher |
| | |switching costs | | |quality with superior service|
|New |low |saturated market w/ few |increased market share to |use resources to enhance |major threat within the |
|Entrants | |strong competitors; high |forecast changing consumer |COMPETITIVE POSITION: focusing |industry are mergers/ |
| | |focus on present |demands/ tastes |on strategies of rivals |acquisitions of major rival |
| | |competitions’ moves/market | | |firms |
| | |share | | | |
|Suppliers |weak |commodity product purchased|firms can purchase lowest |firms can negotiate price; low |delivery times must be |
| | |on the basis of lowest |cost inputs for |inventory costs-pull inventory |precise; purchases of |
| | |cost; negotiating demands |manufacturing; no long term|supply; no competition for |supplies are subject to |
| | |of R&D and quality are |supplier agreements; |suppliers |exchange risk; R&D may be |
| | |unnecessary |purchases will be made on | |issue when dealing w/ |
| | | |demand | |metals(density/ flexibility) |
|Substitute|N/A |N/A |N/A |N/A |N/A |
|s | | | | | |
3. Factors Causing Industry's Competitive Structure to Change
• long term growth rate
• who buys product/what is its use
• product innovation
• technological change
• market innovation
• Entry/Exit Barriers
• diffusion of TECHNOLOGY
• increased globalization
• cost/efficiency
• regulation changes
• societal concerns
• REDUCTION of business risk
4. Rivals Most Likely Next Moves
Vermont American Corp: Not Available
Black & Decker Corp: Looking to expand into new markets.
Introducing new features on developed products that have recognition.
To expand sales within the professional consumers of the industry.
LS Starrett Co.: Primary market is to focus on becoming a global leader in the metalworking industry.
Increase sales globally through reputation and more attention on the markets. The U.S. accounts for 70% of sales while the remaining comes from the other countries.
Search for new markets with potential high growth such as India.
5. Key Success Factors
A. Tech. related KSF's
Expertise in a given technology
Product Innovation Capability
B. Manufact. Related KSF's
Low cost Production
Quality of Manufacture
High utilization of fixed assets
Flexibility to Manufacture
C. Distrib. Related KSF's
Strong networks of distrib.
Low distribution costs
D. Marketing Related KSF's
Breadth/Depth of Product line
E. Skill Related KSF's
Ability develop innovative prod
F. Organization Capability
Ability to respond to market
G. Other Types of KSF's
Favorable image/reputation
Patent protection
6. Industry Attractiveness
| |short term |Long Term |
|Industry’s growth potential |outdoor equipment growth potential is medium to|International market presents the greatest |
| |low |potential for long term growth |
|Does current competition permit adequate |profitability is not very high on the industry|Because international markets secure highest |
|profitability? |(2.3% profit margin) |potential for growth, foreign regulations and |
| | |policies may deplete possibly higher profit |
| | |margins |
|Will competitive forces become stronger or weaker? |Competitive forces should remain the same, with|Competition will increase (internationally) due|
| |fluctuations in profits due to external factors|to the long term growth potentials of foreign |
| |such as exchange risk and cyclical demand |markets, establishing developing economies, and|
| | |new market opportunities |
|How will the prevailing driving forces impact |profitability should remain at lower levels due|Although growth rates are higher in |
|profitability? |to the late growth stage of the industry, high |international markets, profitability will |
| |competition, and the product demands of |remain shallow as a result of exchange risk, |
| |customers |product demands on cost/quality, policies of |
| | |trade, and following rivals into new markets |
|How does the company’s competitive position in the |Blount’s industry leading position shouldn’t |Blount’s profitability should increase as the |
|industry impact profitability? |affect profitability as a result of a |merger expenses are paid and the acquisition |
| |significant merger cost that places them in a |adds to the company’s profitability |
| |weak position FINANCIALLY | |
|Can the company capitalize on its competitors' |Blount is in the ideal position to capitalize |Blount has established the capabilities to |
|weaknesses? |on rival weakness by marketing superior product|disperse products to new markets w/o investing |
| |costs, quality, and service; Blount can also |in extra network centers that rivals lack; |
| |utilize its extensive networks to reach new | |
| |markets | |
|Is the company insulated from or able to defend |presently weak financially, strong market |as acquisition costs are diminished the company|
|against driving forces that make this industry |position, brand name, product |will have the financial resource to exploit |
|unattractive? |quality/innovation will maintain short term |weaknesses of rival firms; buyers will demand |
| |market share; |cost competitiveness /quality |
|How risky and uncertain is the future of this |Risk and uncertainty remains in the late growth|As the risks of the industry fluctuate from |
|industry? |stage, cyclitity of demand, exchange risks, and|market to market, only few firms will be able |
| |policies and regulations |to endure the long term risks (large/ diverse/ |
| | |leveraged firms) |
|How severe are the problems facing the industry? |Short term problems are the long term problems:|long term risks of the industry may cause |
| |internal cost evaluations, high emphasis on |decentralization, merger/ acquisitions, changes|
| |innovation/ customer demand/ network |in strategic posture |
| |relationships, and low profit margin | |
III. Summary of External Factors
|external forces/ factor |opportunity |threat |
|societal, political, legal, regulatory |As a result of international expansion Blount |Regulations/policies may make certain high growth|
| |will continue to grow; blount maintains a strong |markets unobtainable; trade regulations/tariffs |
| |brand name; low likely-hood of new entrants; |may propel higher costs decreasing demand for |
| |movement toward alliances/ mergers/ acquisitions;|product; late growth stage discourages |
| |market size give Blount ability to grow |investments; cyclical demand poses risk; exchange|
| |internally; |risk affects profit |
|industry competitiveness |high competition between few strong competitors;|high competition in fragmented markets; customers|
| |new market opportunities in geographic areas; |maintain bargaining power; switching costs are |
| |companies will focus on marketing/ advertising; |low; rivals may merge; high competition for |
| |high emphasis on innovation; increase in |dealers/distributors; |
| |alliances; high focus on present market share; | |
| |brand recognition is key element in industry; | |
| |demand for replacement part will offset cyclical | |
| |demand of products; blount maintains a strong | |
| |band name, high quality, superior service; | |
D. Internal Factors HOME
I. Blount's Competitive Capabilities
The Outdoor Products segment has been a market leader in the design and manufacture of new product lines with innovative features such as low kick-back saw chain, low vibration chain and consumer guide bars with internal tensioning systems. Within the Outdoor Products, the OCSD has cut its time-to-market for new products by over 50% over the last 5 years. The Outdoor Products has a distribution network, which allows it to serve customers in North America, South America, Europe, and Asia; this allows this segment to maintain a strong brand name worldwide.
In order to maintain its market position, OCSD takes special care to be receptive to the needs of its customers, which is reflected in OCSD’s product development, sales and service efforts. OCSD recognizes that OEM competitors have close relationships with end users, therefore it is essential for this operation to be customer oriented. Also, the Outdoor Products segment has been successful due to its strong engineering and design capabilities as well as its strive to reduce manufacturing costs significantly. Outdoor Products have been so successful, that these costs were reduced by 30% during the past 5 years.
The Industrial and Power Equipment segment operates primarily in North America for the timber harvesting equipment. Approximately 80% of the Industrial and Power Equipment segment’s end market are driven by demand for capital equipment in the pulp and paper industry and by growth in new home construction. Although the pulp and paper sectors have experienced a severe downturn over the past 12 months, the Industrial and Power Equipment segment expects the demand for capital equipment to increase due to a greater demand in pulp and paper products.
Gear Products participates primarily in the North American market for mechanical power transmission components. It is estimated that this market is projected to grow 2% and that the market is $500 million. It is expected that the heavy equipment manufacturers that outsource the manufacturing of component parts and subassemblies will be the primary drivers of growth. It is also expected that the record growth will occur as the demand for hydraulic components and rotation bearings used in industrial and construction equipment to increase in market share on account of Gear Products’ established reputation for quality and reliability.
By utilizing CAD/CAM technology, the Industrial and Power Equipment segment’s product development process has allowed it to quickly meet its customers’ needs. It has been so successful, the time to market new products has nearly dropped 35% during the past 3 years. Along with the decline in the time to market, the Industrial and Power Equipment segment expects to grow in new product development, international expansion, and acquisitions.
1. How well is the present strategy working
• 3 tests of a winning strategy for a single business (competitive advantage, goodness of fit, performance)
• portfolio tests This is the key to the case. Blount uses an unrelated, diversified strategy at the corporate level and differentiated niche strategies for their subsidiaries. This is the basis for their acquisition of companies growing in niche segments of the industries in which they already compete.
• strategic and financial objectives met or exceeded
• strategic approach (focused or broad// cost or differentiation)
• financial strength
• # of stages in the value chain participating in the production-distribution chain
You could improve your analysis by addressing these questions.
2. Analysis of the Value Chain
From the chapter 4 worksheet:
|Criteria |Facts |What does this mean? |
|For the resource types listed below answer the following questions. | | |
|Is the resource hard to copy? | | |
|How long does the resource last/ | | |
|Is the resource really competitively superior? | | |
|Can the resource be trumped by a rival's resources/capabilities? | | |
|Skills and expertise | | |
|Physical asset | | |
|Human asset | | |
|Organizational asset | | |
|Intangible asset | | |
|Competitive capabilities | | |
|Market position | | |
|Alliances or cooperative ventures | | |
• Purchasing/Inbound Logistics: The Outdoor segment’s principal raw material, strip steel, is generally purchased from two vendors, and can be obtained from other sources. Where is your analysis? Is this a weakness for the Outdoor segment? Is this a strength?
• Manufacturing: the Outdoor Products Group operates 13 facilities within the United States, Canada, Brazil, Europe, and Asia. A few of these manufacturing facilities are located in Portland, Oregon, Guelph, Ontario, Canada, Curitiba, Brazil, Coffeyville, Kansas, and Kansas City, Missouri. In 1998 the Outdoor Group utilized approximately 82% of its production capacity, and continues to achieve increases in process efficiency by: improving the level of technology on production floors, increasing purchasing power, and focusing management’s emphasis on process improvements. By adopting such concepts as six-sigma, and Total Quality Management, the Outdoor group has successfully reduced the manufacturing costs of many of their products. Good!
• Outbound Logistics: The Outdoor group sells to distributors, dealers and mass merchandisers serving the retail replacement market. The Outdoor group currently sells its products to more than 30 original equipment manufacturers; approximately 13% of the sales of were to one customer.
• Marketing: The Outdoor Products Group has developed a distribution network allowing it to serve customers in North and South America, Asia, and Europe, maintaining a strong brand name worldwide. Approximately 60% of OCSD’s sales are to over 100 countries outside the United States. Products are sold to over 350 distributors, approximately 8,500 dealers and over 140 mass merchandisers serving the replacement market.
• Sales: Sales for the Outdoor Group was 315.4 million with an operating income of 71.8 million. Sales reflect high volume of lawn mowers and accessories.
• Profit Margin: Blount’s overall profit margin for 1999 was (-3.51%) as compared to 2.3% for the industries top 3 competitors in the Outdoor Product Group. In this group we rank third to our competitors in terms of profit margin.
• Human Resources
3. How are Blount's Functional Areas Performing
• Marketing: The Outdoor Company Sports Division (OCSD) maintains its market position by taking special care of being receptive to the needs of its customers, which reflects in OCSD’s product development, sales, and service efforts. This segment tries to distinguish itself in the market by putting a focus on continuous product improvement efforts. Seventy-two product improvements have been developed over the past 3 years in an effort to continually meet customer needs.
• Operations: the Outdoor group maintains strong engineering and design capabilities that allow it to develop new products and deliver them in a timely manner customers globally. The Outdoor group employees numerous engineers and has made extensive use of engineering technologies to expedite new product development. This is where you can also talk about time to market and the quantity of product innovations.
• Logistics: The Outdoor group has developed a distribution network which allows it to serve customers in North America and South America, Europe, and Asia, while maintaining a strong brand name worldwide. Historically, the Outdoor group has sold their products through full service dealers, North American distributors, and export distributors; trying to avoid mass merchants who maintain a great deal of market power. Good facts. Now is this a strength or a weakness?
• Research & Development
• Information Systems
4. How strong is Blount's Competitive Position
|Competitive Strength ASSESSMENT |Weighted Scale |
|Rating scale: 1=weak 10=very strong |Outdoor Products Group |
|key success factor competitive strength |Company’s strategic Position |Company’s strategic position |
|measure | | |
| |Blnt |Vrmt |B&D |
|Net sales |$809.9 |$831.9 |$716.9 |
|Net income |($21.8) |$61.3 |$59.1 |
|Current assets |$336.0 |$327.1 |N/A |
|Current liabilities |$148.5 |$94.9 |N/A |
|Total assets |$688.7 |$668.8 |$637.8 |
|Total debt |$816.2 |$162.3 |$140.3 |
|Total shareholder’s equity |($321.7) |$354.6 |$316.1 |
|Average shares outstanding |$2,251 |$7,288 |$6,932 |
|Cash Flow from Operations |$19.1 |$88.9 |$80.3 |
Summary of Blount’s Financial Data
In 1999 Blount saw record-breaking performances from the Outdoor Products Group, which had high revenues due to the sale of lawn mowers and accessories and the positive effect of exchange rates in Brazil adding approximately $1.9 million to their balance sheet. Blount needs to keep aware of the market risk that they are exposed due to rapid changes in foreign currency exchange rates. Fluctuations in the exchange rates impact the amount of sales and operating income reported by Blount. The Outdoor Sporting Equipment segment also recorded high performances while the Industrial and Power Equipment segment offset these records of revenues with low performance and sales. In all of their business segments they have continued cost reduction and consolidation methods to keep their products competitive in the world markets they serve.
Blount has significantly increased the amount of debt they have from the re-capitalization transaction last year. The merger was partly financed by the equity contribution of $417.5 million, which is why we see a loss of $321.7 million in the total shareholders equity account. Blount intends to fund working capital and debt service requirements by using cash flows generated from operations. When Blount made the acquisition, they looked at the potential cash flows to make sure that there would be a positive cash flow within the first few years. If the analysis had shown negative cash flow for many consecutive years, the acquisition would not be practical for the company or at least not with regard to the way they financed it. If Blount can bring their cash flows up to reflect the years of high cash flows, the company can fully recover from the substantial loss in net income and shareholders equity.
Summary of Outdoor Product Financial Data
After reviewing the financial statements for the Outdoor Products segment, it shows that sales had increased 3.9% from $315.4 million up to $327.6 million in 1999. The segment’s sales reflect higher volume in sales of lawn mowers and accessories and also from flat sales in the other product lines such as chain saw components.
(This is an area of your paper where the depth of analysis is not consistent with the other sections of the paper. It is an area for improvement.)
SEE FINANCIAL DATA
II. Management's Personal Ambitions, Philosophies, & Ethical Principals
Blount wishes to create/maintain a working environment in which employees will devote themselves to building a successful organization. In efforts to achieve an atmosphere of this caliber, Blount attempts to generate a climate where employees can develop into their maximized potential. Blount management believes that when people are encouraged to express themselves freely, their expectations, in terms of achievements, will be surpassed by inconceivable amounts (I am not sure what you are trying to say here.). This will not only contribute to the growth of the company alone, but also to the contribution of the community at large. Blount believes in a person's responsibility to look beyond employment, encouraging participation in civic, cultural, religious, and political affairs within the United States. Blount does not seek conformity to the corporate governance, merely participation within the enterprise system. Blount believes in no greater responsibility to the American Enterprise than to operate at a reasonable profit. Blount feels that growth, and job security, are dividends of profits; and if Blount wishes to sustain growth on a continuos basis, they must produce profits. Therefore, Blount is dedicated to growth in all aspects: as a company, as an organization, and as individuals. Why does Blount hire its top managers from other companies? It appears that management's expectations for top managers are inconsistent with some aspect of the organizational culture or personnel development processes.
III. Blount's Shared Values & Corporate Culture
The Blount Foundation: Founded in 1970, the Blount Foundation provided financial assistance to various organizations that served the general welfare. The foundation supported organizations that focused on health, education, civic affairs, and cultural activities, making various grants to educational institutions. In 1996, the Blount foundation gave $7 million to the Univ. of Alabama: College of Arts & Sciences; one of the largest ever made in the history of the university.
Alabama Shakespeare Festival (ASF): In 1985, Blount International dedicated the Carolyn Blount Theatre; now home of the Alabama Shakespeare Festival. Costing over $22 million, the theatre maintained a 750-seat festival stage and a 225-seat octagon. The ASF has become the fifth largest Shakespeare festival in the world. The new home of the Montgomery Museum of Fine Arts attracted more than 120,000 visitors per year.
IV. Summary of Internal Factors
E. Strategies HOME
1. Generic Strategy
Blount's generic strategy is focused on niche-market, broad differentiation within fragmented markets. This is true for the business level strategy. At the corporate level, blount uses and unrelated differentiation strategy. Refer to the comments on page 11. Blount has successfully earned leading market positions in fragmented markets as a result of superior manufacturing technology, distribution acumen, product innovation, and customer service. In addition, the niche-market strategy has allowed Blount to reduce the effects of cyclical changes in various fragmented business segments.
2. STRATEGIES TO GAIN AND MAINTAIN COMPETITIVE ADVANTAGE
1. Initiatives to Capitalize on Competitor Weakness
• Blount can gain competitive advantage by exploiting geographic regions where rivals secure weak market share and/or exert less competitive effort.
Blount International Inc. has the distribution capabilities, as well as the manufacturing capabilities that enable them to gain market share from rivals in various market segments. Blount has the ability to meet the changing demands of various markets by using their existing channels and networks. In addition, Blount's existing networks also generate a significant cost advantage in relation to the costs associated with creating new networks and distribution centers; Blount can introduce products to markets quicker, and more cost competitive than its' rivals. This would give Blount the opportunity to capitalize on markets where rivals may charge premium prices or completely neglect as a result of high outbound logistics.
• Blount can attend to special buyer segments that rivals neglect or are disinclined to serve.
Blount pursues a broad differentiation niche (It is either broad or niche. It cannot be both.) strategy within fragmented markets, which aligns Blount's organizational purpose of meeting special market needs. Blount's extensive distribution network allows the company to reach markets that competitors cannot reach without incurring high costs. Blount also retains a manufacturing capability, allowing them to customize certain product lines to customer specifications. With these two capabilities combined with a broad differentiation, Blount has a unique competitive position. Blount can effectively penetrate segmented markets quicker, cheaper, and with more diverse product lines than its competitors. This would grant Blount some first mover advantages (such as brand recognition, and loyalty) within selected markets.
• Blount can go after customers of rivals whose products lag on quality, features, and/or performance.
Blount should focus their strategy on rivals who products lag in the area of quality. If utilized correctly, this can be a useful marketing tool in order to secure market share of rivals without incurring any costs. Blount has adopted the principals of Total Quality Management, and Six-Sigma; quality control principals that have enabled Blount to manufacture products of superior quality than that of rivals. Aside from the company reducing the costs associated with defects, Blount can market a feature (quality) that costs nothing to add; and force rivals to invest monies into quality management programs, resulting in higher product costs. Blount can also focus on features or performance not offered by rivals. Serving niche markets, Blount consistently strives to innovate differentiating features to add to their product's line. Blount may antiquate the competing products of rivals who do not adhere to the niche/broad strategy as a result of initiatives inherent in certain strategies (ex. firms with a global focus/low cost would incur high manufacturing costs to add features). This would give Blount an absolute competitive advantage.
• Blount can offer special sales pitches to the customers of rivals who provide sub-par customer service.
Blount can offer special sales pitches in order to gain market-share from rivals. Blount can utilize its extensive networks in order to provide quicker and more cost competitive customer service than rivals. Blount is able to dispatch replacement parts, with lower costs because of their extensive distribution/manufacturing network centers. This can be an effective marketing tool, especially when soliciting end-users and retailers who continuously seek cost savings. In addition, the low costs of Blount’s outbound logistics may deter rivals from entering unattractively high cost markets, especially in maturing markets where switching costs of consumers are low. This would enhance the relationships with dealers and customers, as well as increase brand recognition among consumers, allowing Blount to increase its market share.
• Blount focus on rivals that have weak advertising/weak brand recognition in selected markets.
Because Blount competes in fragmented markets, they have the advantage in advertising to consumers within selected markets. Blount can market its low outbound logistics costs, and differentiating product features to target markets where competitors may ignore consumer demands or charge high prices. Blount can also market to its lower costs/differentiation to market where competitors ignore the innovation demands of consumers to avoid incurring higher costs.
• Blount has the competitive capability to introduce new models that exploit gaps in product lines.
Because Blount competes in a maturing/late growth markets, and pursues a niche/differentiation, they maintain the corporate initiatives to innovate products that exploit gaps in product lines as well as develop products that satisfy shifting demands in products while maintaining low costs in value chain operations. Blount’s strategy offers the company a tremendous advantage over competitors who pursue strategies that require a re-alignment of initiative in order to meet the cost and product requirements of consumers. Blount can also exploit this strategy with firms who do not have the extensive networks and capital necessary in filling gaps in product demands.
2. Whom do we attack
Because Blount International competes in fragmented industries, the company should seek to attack a variety of competitors in order to gain market share, such as:
• Market leaders: within the Outdoor Sports Group
• Runner-up firms: within the Industrial & Power Equipment Groups
• Struggling enterprises that are on the verge of going under: within all competing industries
Blount holds the position of industry leader in selected fragments within the Outdoor Products Group; the strategy Blount can pursue, which best fit the company’s competitive positions is Fortify and Defend. This strategic stance entails increased spending on; advertising/marketing, customer service, and research & development (making it difficult for competitors to penetrate present market share). The firm should also; introduce more products to fill vacant niches, add personalized services to boost customer loyalty, keep prices reasonable, secure exclusive contracts with dealers and retailers.
3. Using Defensive Strategies to Protect Blount’s Competitive Advantages
• Hire additional employees that deepen Blount’s core competencies (Which competencies?)
• Broaden the firms product line to close off vacant niches
• Keeping prices low on models that most closely match competitor’s offerings
• Lengthen warranty coverage
• Sign exclusive agreements with dealers
• Reduce delivery times of replacement parts
• Provide coupons and sample giveaways to buyers most prone to experimenting:
• Offering free or low-cost training to product users (esp. in undeveloped countries):
• Make public announcements stating initiatives to protect present market share.
• Giving out advance information about a new product, technology breakthrough, or the planned introduction of models in hopes that rivals either will incur high costs or lose market share.
3. Matching a strategy to Blount's Position
|Industry Environment |Slowing Growth/ Maturity/Fragmented/Multi/National |
|Key Issues |cyclical demand of various products, experienced buyers demand innovative products, extensive |
| |competition produces great emphasis on lower internal/product costs, increased competition |
| |facilitates improved post sales’ service, capacity monitoring required, emphasis on innovation |
| |is increased by competition, international competition increases, profitability decreases, |
| |mergers/ACQUISITIONS within industry, increased competition for dealers/distributors, high |
| |marketing focus on present customers, emphasis on quality control, H/R core COMPETENCIES, |
| |regulations/policies, exchange risks, |
|Position |Leader/Aggressive Challenger/Content Follower |
|Strategic Alternatives/Moves |Capitalize on Rival’s Weaknesses/Fortify and Defend |
1. Summarizing the Strategy
Blount’s niche-market/broad-differentiation strategy is ideal for the maturing/slow growth, fragmented markets in which Blount competes. Initiatives to capitalize on competitors’ weaknesses puts Blount in a superior competitive position to gain market share from industry rivals. Blount International can use its extensive networks of manufacturing/distribution channels to introduce new/different products cheaper, and quicker than rivals can. Since the recent acquisition of Lehman, Blount Int. has recorded weak profit margins, which is a significant weakness; capitalizing on rival weaknesses yields a very strong offensive tool for Blount. Blount can utilize their extensive networks of retailers, vast distribution centers, superior product quality, differentiating product properties, and strong brand name to capitalize on competitors' weaknesses, while suffering minimal costs. The strategic implication for rivals would be to meet or exceed the price/quality standards set by Blount, or suffer a loss of market share. In addition, Blount competes in fragmented industries where competitors are discouraged to enter as a result of higher costs and/or strategic limitations (global/low-cost strategy). Blount can effectively gain market-share from competitors that neglect market segments, or product demands, as a result of niche product features. These particular circumstances allow Blount to protect its market share versus competitors who wish to challenge the weak profit margins of Blount (which is attributed to acquisition costs, w/o merger expense profit margin would be 8.62%). An additional feature of this offensive strategy is the low cost of execution; Blount must merely market company strengths more effectively in order to reap the rewards of gaining rivals’ market-share. In addition, firms may opt not to defend market share in fragmented markets as a result of the mature growth stage the industry. Companies may find the need for investment a moot ambition within competitive business fragments in mature industries.
F. Recommendation/Implementation HOME
Recommendations
• Expand into new geographic/product markets
• High growth potential
• Additional market share
• Reduce market risks
• Higher utilization of capacity/fixed assets
I. Forward Integration into services
• Increase in market share
• Balance portfolio risk
• Higher degree of market insight
• Internal/external growth
• Higher utilization of fixed assets
II. Expand operations into replacement parts
• Company can grow with sale of parts for products
• Balance cyclical demand behavior by offering items for repair when consumer can not afford to replace
• Synergies across value chain are created because Blount presently maintains all logistics and distribution channels
• Create new markets with wider breadth of products
• Introduce leasing options for machinery
III. Increased advertising/marketing
• Implement in house training programs for consumers
• Provide dealers w/ teams of sales reps to promote products from w/in
• Increase advertising to consumer markets
• Offer special discounts on volume purchases
• Have sales on new products in order to penetrate new markets
• Increased warrantees for all products
• Promote quality, and cost savings
• Re-focus on both consumer & professional markets
• Cater to consumer demand
• Seek distributors who can focus on these markets
• Accentuate features that appeal to consumer markets
IV. Acquire new businesses that offer growth, economies of scale/scope, balance the portfolio risk, create synergies across value chain
• Search for businesses that reserve high growth potential w/ minimal capital requirements
• Seek acquisitions that could provide present operations w/ economies of scale/scope features
• Make acquisitions that provide a balance in portfolio risk
□ Offset the cyclical demands of present business units; broader range of products
□ Provide counter demand characteristics that reduce risk; ex. As demand increases for replacement parts, demand decreases for new units
□ Decrease exchange risks in purchasing and sales
• Make acquisitions that maximize the company’s present resources; synergies in value chain
□ Share same suppliers necessary in order to receive volume discounts
□ Utilize nearby/same manufacturing plants to increase capacity
□ Share common management valuation
□ Use same purchase/distribution channels as present products(in/outbound logistics)
□ Complement present product line; ex. chain-saw sales promote heavy duty glove use
V. Evaluate foreign exchange risk : conversion of income statement at YE versus incurring exchange risk
• Headquarter base financing; US currency
□ Finance the purchase of raw materials for all operations in US currency
□ Provide compensation budgets for foreign operations
□ Cost of logistics financed through US headquarters
□ Cash flows of operations recorded in US currency
• International operations financing w/ conversion of Income Statement at YE; native currency
□ Purchase raw materials based in local currency
□ Provide compensation in native currency
□ Incur logistics costs in terms of native currency
□ Sustain independent cash flows in foreign operations
(Strength of the US Dollar needs to be concluded; decision of centralized or decentralized financing of operations needs to be made according to the costs associated with currency exchange)
VI. Implement extensive information systems for purchasing, ordering, feedback, organizational management
• Maintain the ability to receive orders quickly, and accurately
• Ability to disseminate information of operations, product offering, and corporate information quickly and accurately
• Provide firm w/ direct customer contact
□ Provide critical feedback
□ Facilitate innovative recommendations
□ Provide market research
□ Enhance consumer/dealer relations
□ Provide management w/ necessary information to make informed designs in a timely manner
□ Creates access for customer service
□ Creates new sales channel
□ Increases Blount’s adaptability to acclimatize to changing market conditions
Implementation
• Building Blount’s competencies, capabilities, and resource strengths to carry out strategy
Blount can hire employees with competencies in engineering, marketing, and management.
Engineering capabilities will enable Blount to increase product quality, capacity utilization, rate-of-innovation, and on-site product development. Engineering capabilities will also strengthen Blount’s manufacturing capabilities such as low cost production, high productivity, and a flexibility to manufacture. Blount can also offer employee incentives that would promote a culture of continuing education within Blount’s internal operations.
Marketing competencies will strengthen Blount’s competitive capabilities. Blount can increase its advertising, implement product promotions, provide mechanical assistance, and increase it market research to support customer service and product innovation, in order to secure customer/dealer relations.
Management skill competencies will assist Blount in managing their related-diversified company, which essentially is many companies united by shared competencies among the value chain activities. Management with skills in managing diversified companies will assist the company in recognizing and creating synergies that single business managers may not offer. In addition, good diversified managers may recognize related/unrelated acquisitions that go beyond the expectations of single business managers, helping Blount achieve its mission/vision.
• Develop budgets geared toward the strategic activities
By implementing such programs as Zero Based Budgeting, and quarterly financial reviews, Blount can continue in its efforts to reduce expenses. The company should be able to shepherd the company’s future growth by measuring the various operations in terms of costs, and establish budget constraints. In cases where resources are needed to implement these strategies, the company should create management initiatives to empower employees. This will give the organization the ability to utilize the skills of manager whose capabilities would be better utilized in areas of greater impact.
• Establish supporting policies/procedures
• Employee empowerment
• Quality control
• Budget expenses
• Reward for achievement
• Continuous improvement
• Promotional incentive
• Installing information, communication, and operating systems that enable personnel to perform strategic roles successfully
With Information Systems in place, Blount will have the ability to cross-reference into other databases where individuals can quickly utilize useful information to make quick decisions in terms of purchasing, advertising, and consumer satisfaction. These systems will give Blount the ability to give and receive information quickly across great distances, allowing the company to respond quickly to changing demands in the market, or changing demands within the corporate operations. These systems will also provide Blount with an efficient means of conducting market research, and procuring working relationships.
• Implement rewards/incentives for the achievement of strategic targets
By establishing an incentive program based on sales, Blount expects its employees to strive to be successful in their careers. If the employees reach an established sales mark, Blount will award those employees with incentives that will continue to promote sale success. With the appropriate training, Blount’s sales staff will be knowledgeable about all of Blount’s products as well as the industry. This will allow Blount’s staff to sell products honestly and competitively.
In addition to establishing incentives based on rewards, Blount can offer discounts to dealers who sell their products in a specified amount of time. In this case, distributors will strive to sell Blount’s products because they will be able to gain an additional financial advantage aside from the normal profit that would be made.
• Creating strategy-supportive work environment
A strategy-supportive work environment will be an environment that prohibits anyone from stepping outside the perimeters of the desired strategies. For example, if there are budget restraints on a given project, no one should be granted “special permission” to spend more than the allocated budget. Another example would involve our strategy of offering free or low cost training to product users. Blount would make sure that this strategy is consistently being implemented in all newly developed countries; this not only means checking to see if this strategy is working, but also conducting evaluations to see what can be changed about the training program in order to make it even more successful.
• Exercising leadership needed to drive implementation
Blount needs to promote employees with abilities to learn/change. Although Blount maintains a staff of very capable top managers, the company must seek diverse managers who can analyze the company and emphasis the initiative to grow within a diverse company. Blount needs to secure able managers/supervisors who can, not only, recognize and reward employees who contribute to the corporate goal, but motivate the employees to adhere to the philosophies of the company. Planning, leading, organizing, and controlling are all valid managerial functions, but only good managers can motivate employees to P/L/O/C themselves.
G. Evaluation & Control HOME
• In order to be able to evaluate the implementation, all employees must be knowledgeable about our working strategies. Therefore, emails will be distributed to Blount’s employees so that they will all be knowledgeable about what is happening within the company.
• In addition, our budgets are monitored on a quarterly basis so that any notable changes may be identified.
• As for the incentive program in effect, Blount expects to keep daily/monthly/yearly records so that the appropriate incentives and target sales amounts may be established according to market conditions.
• Blount will track expansion by monitoring the amount of new operational facilities are acquired/introduced every year. Ex. 3 per year
• Innovations will be divided into innovations & improvement, and each will be tracked quarterly by the rate of each. Ex. Rate of Innovation: 25 Rate of Improvement: 57
• Effectiveness of human resource with core competencies should be evaluated by analyzing all of the aforementioned tools as well as the key financial ratios.
B. Current Situation: Industrial & Power Equipment HOME
I. Blount's Current Performance
Industrial & Power Equipment Group: The Industrial & Power Equipment Group manufactures and markets timber harvesting equipment; industrial tractors and loaders; rotation bearing and mechanical power transmission components. The Industrial & Power Equipment Group is comprised of the Forestry and Industrial Equipment Division, CTR Manufacturing, Inc., and Gear Products, Inc. With headquarters in Zebulon, North Carolina and four manufacturing locations and parts distribution warehouses within the United States, the Industrial & Power Equipment groups sells its products to consumers in the timber harvesting, material handling, construction, land reclamation and utility businesses through a strong network of distributors. In 1999, over 89% of sales ($141.15 million) were in the US; 29% were to two customers. Although the company places a high priority on quality, safety, comfort, durability, productivity, and service provided by its network of distributors, competition within this market is based primarily on quality, price, and brand recognition. In efforts to offset the implications of cyclical demand for their products, the I&PE Group attempt to capitalize on technological and manufacturing expertise by emphasizing the market for replacement parts and new product development both within, and beyond the timber, and land clearing industries.
Gear Products: Gear Products was acquired in 1991, and is a leading manufacturer of rotational system components for mobile heavy equipment. Its primary products include bearings, drives, and swing drives used to provide hydraulic power transmissions in heavy equipment. Gear Products accounted for 16%, $25.37 million, of I&PE Group's sales.
C. External Factors HOME
I. Industry Competitive Analysis
1. Industries Dominant Economic Traits
| |Economic Trait |Strategic Implication |
|Market Size |Annual sale of $4,175,759,000 |large sales revenue potential; medium size market|
| | |relative to product cost |
|Market Growth Stage |Maturity in most markets and geographic areas; |companies will look to expand INTERNATIONALLY; |
| |highest GROWTH potential in developing countries |emphasis on capacity utilization; increasing |
| | |focus on customer relations/innovation/ quality |
|Market Growth Rate |low/expected to increase |high capacity utilization; mergers/acquisitions |
| | |of weaker firms who support expansion of larger |
| | |firms |
|Capacity Surplus/Shortage |capacity surplus for international demand |high capacity utilization of existing firms; |
| | |capacity monitoring throughout industry; |
| | |acquisitions/ mergers; price fluctuations due to|
| | |production capabilities |
|Industry Profitability |low-medium; profit margin 6.5% |firms will maintain strategic positions; PURSUIT |
| | |of new market opportunities; price cutting may be|
| | |used by larger firms to secure market share |
|Entry/Exit Barriers |high/high |low probability of new entrants, high |
| | |concentration of competition among present rivals|
| | |for market share and dealer networks; high exit |
| | |barrier will yield mergers/ acquisitions of |
| | |weaker firms |
|Product Cost |high |high demand for high product quality, long |
| | |product life cycle, and customized features; |
| | |certain strategies will be at a disadvantage |
| | |(global/low-cost) |
|Standard Product | low |increased market research to facilitate sales, |
| | |innovation, and customer satisfaction; products |
| | |will differ with each customer’s spec.’s |
|Technological Speed |medium |range of technology options offers protection |
| | |versus speed of technology (similar to auto |
| | |industry); is not critical to success |
|Capital Requirements |high |creates barrier to entry; increased focus on |
| | |rivals’ financial investments; large investments |
| | |required to make consequential moves |
|Vertical Integration |partial forward |increased competition for dealer commitments; |
| | |high customer focus; |
|Economies of Scale |medium |increased competition to secure market share in |
| | |order to realize max benefits of scale; |
| | |mergers/acquisitions of firms w/ high costs; |
| | |focus on capacity utilization |
|Rapid Innovation |low-medium |low inventory risk associated w/ innovative |
| | |product features, customer spec.’s may not |
| | |include innovative product features |
2. Relative Strength of the Forces that Drive the Industry
| |Strength |Industry Implication |Company Implication |Opportunities |Threats |
|Rivals |Strong |high competition for |focus on market research in|increase market share by |loss of market share due to |
| | |present/future market |order to enhance customer/ |emphasizing product quality, |lagging quality; merger of |
| | |share; price floor |dealer relations; re-vamp |enhancing working |weaker firms may increase |
| | |pressures/ lower profit |value chain (focus on |relationships, and increasing |rivals’ competitive STRENGTHS|
| | |margins; |costs, quality) |brand recognition | |
|Buyers |strong |high degree of customer/ |higher customer/ dealer |increase market share with |penetration of rival buyer |
| | |dealer focus; innovation, |focus; increased market |EMPHASIS on product quality, |segments hindered by brand |
| | |quality, and cost |research within buyer |innovation, cost competition; |loyalty; buyer segments make|
| | |competitiveness will |segments to forecast |high brand loyalty with buyer |up large PORTION of sales |
| | |enhance brand loyalty |innovative demands on |segments | |
| | | |product features | | |
|New |low |competitive focus will |attention of rival firms’ |resources can be allocated to |new rivals will be formed by |
|Entrants | |remain on present industry |moves, and consumers’ |enhance competitive position |merger/ acquisition |
| | |rivals |demands |versus present rivals | |
|Suppliers |low |commodity supplies are |Blount will try to seek |lower input costs will REFLECT |may INCUR higher inbound |
| | |based on price; firms will|lowest cost inputs/ |in increased profit margins or |logistics costs or exchange |
| | |compete for best price |EMPHASIS on delivery time/ |lower prices |risk, which would reflect in |
| | | |cost | |profit margin as product |
| | | | | |prices remains stable |
|Substitute|low |N/A |N/A |N/A |N/A |
|s | | | | | |
3. Factors Causing Industry' Competitive Structure to Change
• long term growth rate
• who buys product/what is its use
• product innovation
• technological change
• market innovation
• Entry/Exit Barriers
• diffusion of TECHNOLOGY
• increased globalization
• cost/efficiency
• regulation changes
• societal concerns
• REDUCTION of business risk
4. Rivals Most Likely Next Moves
Terex Corp: The firm is preparing to expand into new geographic markets, and is in the process of implementing information systems for product support, ordering accuracy, and company efficiency; expand distribution networks
Clark Equipment: Expand into new product/geographic markets; increased focus on expertise, services and development of equipment and process; make new acquisitions
Holnam Inc.: Not Available
5. Key Success Factors
A. Tech. related KSF's
Ability to use the Internet
B. Manufact. Related KSF's
Quality of Manufacture
High utilization of fixed assets
Low Cost Design/Engineer
C. Distrib. Related KSF's
Strong networks of distrib.
Low distribution costs
D. Marketing Related KSF's
Customer Guarantee/Warrantee
E. Skill Related KSF's
Develop innovative/improved prod
F. Organization Capability
G. Other Types of KSF's
Favorable image/reputation
Patent protection
6. Industry Attractiveness
| |short term |Long Term |
|Industry’s growth potential |The I&PE industry growth potential is low |developing countries offer highest prospects |
| | |for growth |
|Does current competition permit adequate |profitability remains mediocre as a result of |profitability may increase, but may be offset |
|profitability? |high entry barriers/product price |buy adverse trade policies/ REGULATIONS or |
| | |outbound logistics costs in developing |
| | |countries |
|Will competitive forces become stronger or weaker? |the five forces should remain the same, given |competitiveness will increase due to growth |
| |that the cyclical demand is stable |potential in foreign venues & as buyer demands |
| | |increase |
|How will the prevailing driving forces impact |short term PROFITABILITY should remain |profitability may decrease as firms try to gain|
|profitability? |relatively stable although cyclical demand and|new market share by OFFERING lower prices in |
| |input costs may affect margin |new markets, and incur logistics costs/ |
| | |TARIFFS/ taxes |
|How does the company’s competitive position in the |Blount’s industry position is INCONSEQUENTIAL |Blount has established the capabilities to |
|industry impact profitability? |as it competes in fragmented industries; w/i |exert competitive pressures on profitability by|
| |fragments Blount may exert competitive |utilizing company strengths versus rival |
| |pressures to decrease profitability |weakness (quality, networks, loyalty) |
|Can the company capitalize on its competitors' |Blount’s recent acquisition exposes some |Blount will be able to capture rival market |
|weaknesses? |financial weaknesses, but has the |share as the merger costs are relatively short |
| |network/quality/loyalty to maintain market |term & blount has maintained long term |
| |share |loyalty/networks and superior distrib/manu |
| | |capabilities |
|Is the company insulated from or able to defend |Blount diversified strategy protects the firm |as blount continues to diversify/spread |
|against driving forces that make this industry |from the external forces levied upon it |portfolio risk the firm’s COMPETITIVE position |
|unattractive? | |will be strengthened across all BU’s |
|How risky and uncertain is the future of this |generally the business is exposed to exchange |as growth progresses in international markets |
|industry? |risk and cyclitity in pulp demand |the industry will have increased exchange |
| | |risks, policy/ regulation exposure, and |
| | |cyclitity |
|How severe are the problems facing the industry? |The risks posed to the firm may decrease |Risk in inherent in business, risks will not |
| |profit margins in the near future |discourage ventures into high growth markets |
| | |unless they threaten the LIVELIHOOD of the firm|
D. Internal Factors HOME
I. Blount's Competitive Capabilities
1. Analysis of the Value Chain
• Purchasing/Inbound Logistics: The Industrial segment purchases metals from commodity suppliers (natural resources). This product is usually purchased on the basis of price and quantity, in terms of costs and is shipped directly to the manufacturing facilities. The supplies are purchased on a first in first out inventory system, with the purchase having exposure to exchange risk.
• Manufacturing: The Industrial and Power Equipment segment has 4 manufacturing facilities and had utilized approximately 65% of its production capacity (based on an 80-hr workweek) in 1998. The Industrial and Power Equipment segment has highly automated machinery, equipment, tooling and facilities that, along with its skilled workforce, maximize productivity and control costs. Flexible manufacturing capabilities and excess capacity allow it to develop, manufacture and quickly bring new products to market. This flexibility allows for slowing down production in order to avoid excessive overhead burden in cyclical down turns, while allowing for rapid production increases during times of high demand.
• Outbound Logistics: The Industrial and Power Equipment’s timber harvesting equipment are primarily distributed through dealers, which buy directly from manufacturers. Large pulp companies have also begun to purchase directly from manufacturers. The timber harvesting equipment division sells its products through a network of approximately 250 dealers in over 400 locations in North America and an additional 20 dealers overseas, primarily in the timber harvesting regions of South America and South East Asia. Approximately 90% of Gear’s Products’ sales are to more than 350 OEMs servicing the utility, construction, forestry, and marine industries. Approximately 5-7% of sales are attributed to replacement parts. The remainders are through a limited dealer-distribution network.
• Marketing: The Industrial and Power Equipment segment’s customer base is primarily comprised of commercial loggers operating in both the construction and the pulp and paper industries, approximately 50% of which are unique components to our product lines. The segment has a well-developed order system that allows it to maintain an excellent one-day fill rate of approximately 90% for replacement products.
• Sales: The I&PE segment is a cyclical, capital goods business whose results are closely linked to the strength of the forestry industry. There is extreme competition among for the availability of sales, encouraging the Industrial group to offer discounts. Sales by the segment where 229.8 in ’98; the segment incurred an operating income of 27.9 million.
• Profit Margin: Blount's overall profit margin for 1999 was (-3.51%) as compared to 6.5% for the industries top 3 competitors in the Industrial and Power Equipment Group. In this group we rank third to our competitors in terms of profit margin.
2. How are Blount's Functional Areas Performing
• Marketing: The Industrial group focuses on marketing new product development, which allows it to distinguish itself in the market. Over the past three years, the Industrial group has developed and marketed 47 new products in efforts to continually meet customer needs; the segment also focuses on international market as well.
• Operations: The company implemented a program of production consolidation and realignments in this segment to lower costs and improve productivity. One manufacturing facility was closed during the first half of 1999; another small facility was closed during the third quarter of 1999, outsourcing its production. The group operates primarily in the North American Market for timber harvesting equipment.
• Logistics: The Industrial group operates primarily in the North American market. The division sells its products through a network of approximately 250 dealers, in over 400 locations in North America and additional 20 dealers overseas, primarily in the harvest regions of South America and Southeast Asia.
3. How strong is Blount's Competitive Position
|Competitive Strength ASSESSMENT |Weighted Scale |
|Rating scale: 1=weak 10=very strong |Industrial & Power Equip. Group |
|key success factor competitive strength |Company’s strategic Position |Company’s strategic position |
|measure | | |
| |TRX |CLK |
|Market Size |$1,949,750,000 in sales for ‘98 |increased competition among industry rival for |
| | |market share, new entrants, consolidation of |
| | |fragmented firms |
|Market Growth Stage |late growth |firms will UTILIZE capacity; acquire/merge with |
| | |rivals or fragmented firms; seek markets with |
| | |growth opportunities; emphasis working |
| | |relationships, innovation, and product quality |
|Market Growth Rate |13% hunting, 3% law enforcement, 6% related units |some rates remain constant while others are |
| | |counter cyclical (depending on the number of |
| | |non-working days), firms will seek markets with |
| | |greatest growth/profit potential |
|Capacity Surplus/Shortage |Capacity surplus |capacity utilize w/i industry; capacity |
| | |monitoring of rival firms; varied costs among |
| | |firms resulting from capacity surplus or shortage|
|Industry Profitability |mediocre @ 8.29% |small LIKELIHOOD of entrants/ exit; firms will |
| | |seek cost reductions to increase profit margin or|
| | |lower prices to gain market share |
|Entry/Exit Barriers |high/high |discourage new entrants; high focus on present |
| | |industry rivals, high competition for market |
| | |share; acquisition/ consolidation of weaker firms|
|Product Cost |low-medium |low switching costs; creation of brand loyalty; |
| | |high focus on consumer demands/ quality/ price |
|Standard Product |high |consumer loyalty will secure market share; low |
| | |prices/ high quality/ aggressive marketing to |
| | |penetrate new markets |
|Technological Speed |low |low inventory risks; PURCHASING of supplies/ |
| | |manufacturing forecasted to meet demand (pull |
| | |inventory schedule) |
|Capital Requirements |high |create barriers to entry; investments require |
| | |high returns for justification; extensive |
| | |research of market/ rival prior to expenditures |
|Vertical Integration |partial FOREWORD |high focus on customer/ dealer relations; market |
| | |research for insight; quality/ service is |
| | |important |
|Economies of Scale |high |realized especially in the purchase of input |
| | |metal (brass); competition for market share to |
| | |support scale |
|Rapid Innovation |medium |emphasis on innovation to secure/protect market |
| | |share; increased market research; re-vamp value |
| | |chain to accommodate production modifications |
1. Relative Strength of the Forces that Drive the Industry
| |Strength |Industry Implication |Company Implication |Opportunities |Threats |
|Rivals |high |high competition for market|must keep costs low to |strong market insight will |low switching costs threaten |
| | |share/ dealers; lower |maintain strong profit |enhance customer/ dealer |market share; costs may not |
| | |profits; increase price |margin; increase market |relations, facilitate |be as competitive |
| | |pressures |research to strengthen |innovation, and increase | |
| | | |market insight |loyalty | |
|Buyers |high | high emphasis on consumer |firm must maintain buyer |secure market share by |cyclical demand reduces |
| | |demands of quality, price, |loyalty with extensive |innovation; penetrate new |market share; rivals offer |
| | |and innovation; buyers have|market research to innovate|markets with lower prices, high|identical products w/ lower |
| | |BARGAINING power |new products |quality |price |
|New |low |will allow rivals to |exploit competitors |opportunity to gain share by |industry consolidation/ |
|Entrants | |concentrate competitive |weaknesses; realize company|exploiting rival weaknesses; |mergers/ ACQUISITIONS |
| | |resources on present market|strengths; focus on |use resources to focus on | |
| | |w/o fear of entrants |consumer demand |relationships | |
|Suppliers |low |commodity products |blount seeks lowest cost |purchase products from multiple|fluctuations in price may |
| | |purchased on price; high |supplier; fluctuations in |suppliers; higher profit |deplete profits due to |
| | |availability |profit margin as prices |margins will STRENGTHEN firm; |stable product cost; may lose|
| | | |vary but product price |lower product cost will secure |share if prices rise |
| | | |remains stable |share | |
|Substitute|N/A |N/A |N/A |N/A |N/A |
|s | | | | | |
2. Factors Causing Industry' Competitive Structure to Change
• long term growth rate
• who buys product/what is its use
• product innovation
• technological change
• market innovation
• Entry/Exit Barriers
• diffusion of TECHNOLOGY
• increased globalization
• cost/efficiency
• regulation changes
• societal concerns
• REDUCTION of business risk
4. Rivals Most Likely Next Moves
Pentair, Inc:
Bulova Tech. LLC:
Crosman Corp:
5. Key Success Factors
A. Tech. related KSF's
Ability to use Internet
B. Manufact. Related KSF's
Low cost Production
Quality of Manufacture
Flexibility to manufacture
High utilization of fixed assets
C. Distrib. Related KSF's
Strong networks of distrib.
Low distribution costs
D. Marketing Related KSF's
Breadth/Depth of Product Line
E. Skill Related KSF's
Ability develop innovative prod
F. Organization Capability
Ability to respond to market
G. Other Types of KSF's
Favorable image/reputation
6. Industry Attractiveness
| |short term |Long Term |
|Industry’s growth potential |growth potential remains mediocre; increased |growth potentials remain highest in |
| |penetration of law ENFORCEMENT will increase |international expansion, and with new product |
| |market share |innovation |
|Does current competition permit adequate |profitability remains high resulting from |profitability may remain the same as policies/ |
|profitability? |economies of scale w/i large market w/ few |regulations in foreign market deplete the |
| |large competitors |profit margin; may experience slight increase |
| | |in deeper penetration/ innovation take place |
|Will competitive forces become stronger or weaker? |competitive forces should remain the same |competitive forces will increase all rival |
| |holding supplier prices STABLE as well as |firms will seek new growth opportunities, and |
| |cyclical demand |buyers become more experienced |
|How will the prevailing driving forces impact |profitability may FLUCTUATE minimally due to |rival competition, buyer DEMANDS, and policies/|
|profitability? |input prices; buyer demand may also drive |regulations will drive down profits |
| |profitability down a bit | |
|How does the company’s competitive position in the |the company is very strong in terms of buyer |Blount’s competitive positions should improve |
|industry impact profitability? |loyalty, working relationships, product |as liabilities are paid; the firm maintains the|
| |quality, and innovation; financially Blount is |capabilities to impact profitability with its |
| |suffering from acquisition costs |strong market presence |
|Can the company capitalize on its competitors' |Blount is in a good position STRATEGICALLY in |the company has positioned itself to be able to|
|weaknesses? |order to capitalize by marketing its strong |reap the reward of these strengths for a |
| |brand loyalty, high quality, and extensive |lengthy amount of time; rival firms will not |
| |networks |seek investment as means of securing market |
| | |share |
|Is the company insulated from or able to defend |although the company suffers a low profit |because blount is diversified the company has |
|against driving forces that make this industry |margin, the result will be a stronger firm with|the capabilities to defend against rival firms |
|unattractive? |enhanced position |and buyer cycles |
|How risky and uncertain is the future of this |risk/UNCERTAINTY lies in consolidation w/i the |exchange risk, foreign policies, mergers/ |
|industry? |industry and cyclical demand of consumers |acquisitions, and cyclitity will affect the |
|See my earlier comments. | |future of the industry |
|How severe are the problems facing the industry? |the problems in the short term are the |as the industry moves to maturity price |
|See my earlier comments. |AFOREMENTIONED risks of the long term; |pressures will cause consolidation/ mergers; |
| | |profitability will decrease as rivals compete |
| | |for market share |
C. Internal Factors HOME
I. Blount's Competitive Capabilities
1. Analysis of the Value Chain
See my earlier generic comments about how to conduct the value chain analysis.
• Purchasing/Inbound Logistics: Sporting Equipment group’s optical equipment products are produced by third party manufacturers in Asia and distributed from a warehouse in Thomasville, Georgia. The Sports group purchases it’s from commodity natural resource suppliers. The supplies (brass) is are shipped directly to the Sports’ groups manufacturing facilities. See my earlier comments about analysis that leads to a conclusion about strengths and weaknesses. This comment applies throughout this value chain analysis.
• Manufacturing: the Sports Group manufactures ammunition and accessories at five locations in North America, utilizing approximately 61% of its production capacity in 1998. The Group continuously attempts increase it’s manufacturing productivity and efficiency, and has been able to reduce costs significantly by means of statistical quality control (TQM, Six-Sigma), and by the application of manufacturing expertise. In addition, The Group has also reduced purchasing costs by increasing the scale of purchases of primary raw materials. The Sports group has also taken proactive measures in efforts to gauge customers’ preferences by maintaining a large staff of engineers and using technologies, such as CAD/CAM. (I do not understand the logic of this last sentence.)
• Outbound Logistics: The Sporting group primarily serves two markets: ammunition for law enforcement and ammunition and accessories for the shooting sports industry. The major markets of the sports group include two-step distributors, cooperative merchants and government agencies.
• Marketing: The Sports Equipment Group has a large and experienced sales force consisting of 11 regional sales managers and 7 representative agencies with 65 representatives. The sales force markets through multiple channels; law enforcement agencies, original equipment manufacturers, national and regional accounts, dealers and distributors.
• Sales: Sales for the Sporting segment were 286.7 million, while the operating income was 36.1 million. These results reflect a higher volume for ammunition and related components, sports optics, and other products. Sales were partially affected by the competitive pricing actions required during the year in one of the segments’ products.
• Profit Margin: Blount’s overall profit margin for 1999 was (-3.51%) as compared to 8.29% for the industries top 3 competitors in the Industrial and Power Equipment Group. In this group we rank third to our competitors in terms of profit margin.
• You need to address HR, G&A, and R&D as part of the value chain analysis.
2. How Well are Blount's Functional Areas Performing
• Marketing: The sports group has dramatically the size of its sporting equipment sales force, enabling it to reach a much broader network of customers and end-users. The Sport segment also focuses on new product development in efforts to distinguish itself in the market. Over the past three years, the group has developed 400 new or improved products in an effort to continually meet customer needs.
• Operations: In the second half of 1998 the Sporting Group completed cost reduction activities by consolidating its raw materials purchasing and sales and marketing organizations, transferring certain production to lower cost facilities and eliminating certain outsourcing. These cost reduction activities saved the group $3.7 million.
• Logistics: The Sports group is continually focusing on leveraging its manufacturing and distribution capabilities. In 1998, approximately 25% of sales occurred outside of the United States. International sales are subject to inherent risks, including changes in economic and political conditions, the currency exchange risks, and regulatory environmental concerns.
3. How strong is Blount's Competitive Position
|Competitive Strength assessment |Weighted Scale |
|Rating scale: 1=weak 10=very strong |Outdoor Sports Group |
|key success factor competitive strength |Company’s strategic Position |Company’s strategic position |
|measure | | |
| |Pent |BTLLC |
|Long term growth rate |Low growth rate; highest rates expected in |rivals will attempt to expand into foreign |
| |international markets: europe |markets; high concentration of marketing in |
| | |mature markets |
|Who buys products/what is use |PROFESSIONAL LOGGERS, farmers, construction |rivals will target marketing efforts to largest |
| |workers, home owners |segment of users |
|Product Innovation |high emphasis on innovation to secure market |companies will copy rival products; high emphasis|
| |share in mature industries: product |on customer focus/input |
| |differentiation | |
|Tech. change |low rate of tech. change, inventory costs must |low chance of leapfrog technology; high emphasis |
| |remain low to keep p-margin up |on sales |
|Marketing innovation |use of information tech. to solicit consumer |high efforts to introduce new tech.; |
| |input; increase market research |implementation of info. systems to remain |
| | |competitive |
|Entry/Exit of firms |barriers will remain high; profit margins may |increased market share competition; rival firms |
| |decrease |may merge |
|Diffusion of Tech. |low |companies will invest in marketing present |
| | |technologies; increased emphasis on |
| | |dealer/consumer relations |
|Increased globalization |firms will move into new geographic areas w/ high|firms may merge; new acquisitions/alliances; more|
| |growth rates; high capacity UTILIZATION, increase|standardized product lines |
| |economies of scale/scope | |
|Cost/efficiency |re-vamp of value chain operations; examination of|increased competition for effective distribution |
| |internal costs: logistics, R&D, customer service,|channels; re-examination of exchange risks & |
| |advertising, and input costs |portfolio characteristics |
|Regulation changes |high impact of regulations; attempt to minimize |strong lobbying efforts; high competition for |
| |affect by strategic alliances/ acquisitions |strategic alliances that offer high growth/low |
| | |costs |
|Societal concerns |strong community involvement; environmental |extensive market research; emphasis on community |
| |concern; increased market research; involvement |support; high customer feedback |
| |in local politics/regulations | |
|Reductions in business risk |acquisitions of complementary business units; |high focus on market research; increased |
| |DIVESTITURE and mergers; societal involvement; |competition for market share verse major rivals; |
| |diversity in business portfolio; increase in less|high focus on government relations; value chain |
| |cyclical products |re-vamp; high EMPHASIS on innovation; search for |
| | |new markets |
HOME
Competitors Next Moves: Outdoor Products
VRMT: not available
B&D: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
LSS: competitive scope: multi-country, Strategic intent: be among industry leaders/overtake a rival, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: best cost
HOME
APPENDIX B: industrial
|Industrial & Power Equip: Drivers of change |Industry competitive Structure |Industry Business Environment |
|Long term growth rate |low; expected to increase w/ high potential in |attempt to expand into FOREIGN markets; strategic|
| |developing countries |alliances/acquisitions |
|Who buys products/what is use |COMMERCIAL loggers in pulp and paper industry; |CYCLICAL demand for product by small customer |
| |waste disposal |base; highly COMPETITIVE, high emphasis on |
| | |quality, cost, and innovation; strong |
| | |distribution channels |
|Product Innovation |extensive market research w/ strong distribution/|high COMPETITION for distribution networks; |
| |dealer relations |emphasis on customer demand |
|Tech. change |rate of TECHNOLOGY is low to medium |emphasis on manufacturing capabilities; product/ |
| | |market research |
|Marketing innovation |e-comm implementation; high market research |competitive market conditions in emerging |
| | |markets; emphasis on brand name |
|Entry/Exit of firms |barriers are high; companies will merge/ be |increase in market share between rival firms; |
| |acquired; alliances may be formed |increased market research in markets w/ Higher |
| | |growth rates |
|Diffusion of Tech. |low-medium |emphasis on innovation; technology focus: |
| | |animated harvesting equipment; market research |
| | |increase |
|Increased globalization |moves to new geographic locations; new alliances/|move to multi-country strategy; emphasis on |
| |mergers/ acquisitions; stream line operations |capacity utilization; alliances/merger w/i |
| | |industry; market research |
|Cost/efficiency |reduce costs along value chain; pruning of |high emphasis on internal costs savings; budgets |
| |product line; capacity utilization |on spending on advertising, R&D, and quality |
|Regulation changes |high focus on government policies; strategic |high customer focus in local operations; emphasis|
| |alliances; attempts to impact government |on community support; consumer feedback |
| |regulations; strong community input | |
|Societal concerns |strong community involvement; high market |high customer feedback; community support groups;|
| |research in fragmented/ emerging markets |auditing of local governments; environmental |
| | |concerns addressed |
|Reductions in business risk |expand product offering; increase in innovation; |increase in R&D, increase market research; assess|
| |re-vamp value chain; form strategic alliances; |internal costs; form community support groups; |
| |broaden consumer base; increase societal |broaden product offering; form alliances; |
| |involvement; move to high growth markets |evaluate currency risks across portfolio |
HOME
Competitors Next Moves: Industrial & Power Equipment
Terex: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
Clark equipment: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
HOME
APPENDIX C: sporting
|Sporting Equipment Group: Drivers of change |Industry competitive Structure |Industry Business Environment |
|Long term growth rate |mediocre w/ highest growth rates in international|rival will increase R&D efforts, expand into high|
| |expansion, further penetration of present |growth markets and increase competition for |
| |markets, & new product development |present market share |
|Who buys products/what is use |law enforcement & shooting sports markets |highly competitive market; emphasis on brand name|
|Product Innovation |high emphasis on innovation to gain market share;|high emphasis on customer feedback; competition |
| |extensive market research; strong dealer |for distribution/dealer networks; high marketing |
| |relations | |
|Tech. change |low rate of technological change |low emphasis on inventory risk; increase efforts |
| | |to market to consumers to secure brand |
| | |recognition |
|Marketing innovation |E-comm/ information systems implementations; high|competitive market conditions especially in |
| |customer/dealer input |emerging markets; efforts to establish brand name|
|Entry/Exit of firms |barriers are high; competition will focus in |increased competition for market share; emphasis |
| |rivals; possible mergers/acquisitions |on marketing in markets w/ high growth rates |
|Diffusion of Tech. |low |rivals will place emphasis on marketing present |
| | |technologies; TTM must remain low in terms of |
| | |product innovation |
|Increased globalization |focus on high growth rate markets; acquisitions/ |high market research; strong advertising; |
| |mergers/ alliances/ decentralization; stream |increased capacity utilization; strong |
| |lined operations |distribution network competition |
|Cost/efficiency |Re-vamping value chain: logistics, manufacturing,|increased competition for dealer networks; |
| |HR, R&D, and cost of inputs |internal cost evaluations; product line pruning |
|Regulation changes |attempts to structure organization STRATEGICALLY;|competition via government lobbying; strong |
|The increased concern with violence is driving |increased community involvement; strong |community involvement; above standard corporate |
|increased legislation and negatively impacting |government involvement; market insight |policies; alliances/ mergers/ acquisitions |
|the industry | | |
|Societal concerns |strong community involvement; market research; |high customer feedback; extensive market |
|The increased concern with violence is negatively|perceptive corporate foundation |research; community support groups; lobbying; ISO|
|impacting the industry | |certifications; corporate policy evaluations |
|Reductions in business risk |Strong internal operations; high customer focus; |value chain evaluations; increased competition |
|The factors stated above are increasing risk |advertising/marketing; societal involvement; |for dealers; increased marketing & advertising, |
| |evaluation of portfolio; innovation |market research; alliances/ mergers/ |
| | |acquisitions; community involvement |
HOME
Competitors Next Moves: Sporting equipment Group
Pentair, inc.: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
Bulova tech. llc: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
Crosman corp: competitive scope: multi-country, Strategic intent: be among industry leaders, Market share objective: expansion via internal growth, Competitive Position and Situation: getting stronger and on the move, Strategic posture: combination offensive/defensive, competitive strategy: broad differentiation
HOME
APPENDIX D: corporate
John M. Panettiere: Mr. Panettiere was elected President an Chief Executive Officer of Blount Inc. in 1993, and elected Chairman of the Board in August, 1999. While John held his senior position as CEO in 1993 the company's stock increased from a low of $5.3/4 to a close of $28.3/16, including a three for two stock split in 1995, and a two for one split in 1997. Under Panettiere's management, Blount has sustained a business strategy that seeks to integrate a balanced diversification portfolio, with leadership in niche markets on international levels, and acquiring other business entities who offer superior growth opportunities. The primary characteristics of the diversified units include manufacturing niche market products holding leading share positions resulting from product attributes, distribution, skill, and exceptional customer service. Mr. Panettiere's vision is to acquire a manageable number of leading niche market products, promoting corporate growth. Other Concerns of Mr. Panettiere where:
• Cash flow
• Acquisition
• Cultural changes
• Budgeting
• Process changes
• Personnel changes
Cash Flow: Since August of 1992, Blount International has been out of the banks, not having to borrow since. In 1997, Blount has had a cash flow of over $100 million, with a free cash flow of $55 million after capital expenditures, dividends and taxes.
Acquisition: The internal rates of return on recent acquisitions have been extraordinary.
Cultural changes: There has been a significant cultural change in the corporate atmosphere since Mr. Panettiere's appointment. Since then, Blount management has initiated a systematic management of cash, including monthly operations guide that measures receivables, daily inventory, cash flow, working capital turnover, capital expenditures, depreciation, number of employees, equivalent overtime, order board, percentage of gross profit, and trend charts in order to observe various market conditions.
Budgeting: Mr. Panettiere has initiated quarterly financial reviews at every major location. Using a zero based budget approach; managers must justify their yearly budget by presenting sales and product plans, followed by a capital plan, and finally an expense budget.
Process changes: In Mr. Panettiere's first year, Blount doubled its capacity without adding any new facilities. By simply replacing older machines with new ones and replacing some equipment one machine achieve the output of seven. Blount has also begun to expand its distribution and service centers.
Personnel changes: Only one of the three senior managers employed by Blount in 1992 remains on the staff today; new people have been acquired through networking, executive search firms, and prior contact. Mr. Panettiere has recruited most of his management employees from various past contacts he has made throughout his career, and they have paid dividends.
Education: University of Kansas, Lawrence, KS, 1955-1956,
Westminster College, Fulton, MO, 1956-1959,
Rockhurst College, Kansas City, MO, 1960-1963
Professional Experience: Ford Motor Company 1959-65,
Chrysler Corp. 1965-69, American Motors Corp. 1969-75,
Fiat-Allis Corp., Chicago, IL 1976-86,
Hanson PLC, Hanson Industries, Grove Worldwide 1986-92,
Blount, Inc., 1992-95,
Blount International Inc., 1995-present
Professional Associations: Board of Directors, Alabama Shakespeare Festival,
Board of Directors, Montgomery Area Chamber of Commerce,
Past chairman, Construction Industry Manufacturers Association (CIMA)
Honorary Doctorates: Westminster College, Fulton, MO
Military: U.S. Army National Guard 1959-60, Honorable Discharge 1965 BACK
Harold E. Layman: Elected as President and Chief Operating Officer February 2000. The position had bee vacant since June 1993 when Mr. Panettiere was elected to President/CEO. Mr. Layman has been on the Board of Director since August 1999, and will continue to serve as Director of Blount International. Mr. Layman, now age 53, joined Blount in January 1993 as the Senior Vice President and Chief Financial Officer. Mr. Layman was then promoted in to Executive Vice-President-Finance Operation and Chief Financial Officer in February 1997. Prior to joining Blount International, Mr. Layman served as senior Vice President and Chief Financial Officer of VME Group located in Brussels, Belgium, and has held various operational and financial positions with Ford Motors. Mr. Layman contributes to the growth of Blount, not only with his expertise in finance, manufacturing, and distribution, but also with a keen insight of all operations within Blount International.
BACK
Gerald W. Bursett: Mr. Bursett was elected as Group President of Outdoor Sports in 1998. Mr. Bursett is regarded highly, as one of the most outstanding individuals in today's outdoor sports industry with a stellar performance with the Winchester Division of the Olin Corporation; a major competitor of Federal Cartridge. Mr. Bursett will provide Blount a strategic direction and growth; allow the company to utilize tremendous synergies among the present companies in the outdoor sports industry. Mr. Bursett has served with as chairman of the Board of the National Shooting Sports Foundation and as a board member of the Wildlife Management Institute, The congressional Sportsman Foundation and The Sporting Arms and Ammunition Manufacturers Institute. Mr. Bursett spent 1965-82 with the Olin Corporation. In 1982, he was appointed Vice-President and General Manager of the Ramset division of Olin, of the Winchester Group. In 1985 he was appointed vice President and General Manager of the Winchester Division, including the worldwide manufacturing and marketing of Winchester Ammunition. In 1995, Mr. Bursett was elected President & Chief Operating Officer of Sturm Ruger, resigning in 1997. BACK
John D Marshall: Mr. Marshall was promoted to Senior Vice President-Administration and Treasurer in December of 1999. Mr. Marshall will have the responsibility for the corporation's administrative and human resources functions as well as functional responsibility for human resources at Blount's fourteen field locations around the world; while maintaining his present responsibilities of treasury operations, risk management, and investor relations. Mr. Marshall graduated with a Bachelor's degree in Accounting from Loyola College in Baltimore in 10973 and earned his CPA certification in 1975. John previously had careers with Peat Marwick Mitchell & Co., an international accounting firm. In 1980, he joined Grove Manufacturing Company and held various management and executive positions within the U.S. and Europe. In 1993 Mr. Marshall was appointed Vice President of Finance for the forestry and Industrial Equipment Division of Blount, and became the Senior Vice President of Operations in 1994, until 1997 when promoted to Vice President and Treasurer of the Corporation. BACK
Zoe F. Schumaker: In 1997, Zoe F. Schumaker was elected Vice president Information Systems, a new position in the Blount Corporation. Mrs. Schumaker offers experience to this new position responsible for strategic planning, policy development, business process developments and business systems planning in the area of information systems. Ms. Schumaker has experience in these areas with Blount and as a consultant for over 10 years; allowing greater focus on these areas to support growth in sales, productivity improvements, and customer service. Schumaker received her MBA degree from the University of Oregon. BACK
Richard H Irving, III:
Professional Highlights: Vice-President and General Counsel, Duchossois Industries, 1985-95
Associate General Counsel, Union Camp corp., 1979-86
Assistant Federal Counsel, Rockwell International Corp., 1974-79
Attorney, Westinghouse Electric, 1972-68
Associate, Kirkland and Ellis, 1968-72
Education: Northwest University, Bachelors of Science, 1965
Harvard Law School, LL.B., cum laude, 1968
Activities: American Bar Association: American Corporate Counsel Association
International Bar Association BACK
Financial Data
|Outdoor Products Group |Industry SIC |Major Competitors Overall |
|Ratios and Growth Rates |3425 |Blount Overall |vrmt |b&d |lss |
|Industry Ranking | |#1 |#3 |#4 |#5 |
|Sales (thousands) |$3,580,867 |$809.9 |N/A |$4,520,500 |$232.4 |
|Current Ratio (times) |2.4 |2.26 |N/A |1.22 |5.39 |
|Total debt to equity % |69.2 |-2.54 |N/A |1.55 |0.05 |
|Profit Margin % |2.3 |-3.51 |N/A |7.02 |6.43 |
|Return on Investment % |2.9 |-5.08 |N/A |12.89 |6.72 |
|Return on Equity % |21 |-146.34 |N/A |48.49 |7.81 |
|Return on Assets % |7.3 |-4.20 |N/A |8.01 |6.09 |
|Inventory Turnover (times) |2.72 |4.66 |N/A |N/A |N/A |
|Market Capitalization (millions) |N/A |409.99 |N/A |3405.98 |161.09 |
HOME
|Industrial & Power Equipment Group |Industry SIC |Major Competitors Overall |
|Ratios and Growth Rates |3531 |Blount Overall |Terex Corp |Clark Equip. |Holnam Inc. |
|Industry Ranking | |12th |9th |10th |11th |
|Sales (thousands) |$4,175,749 |$809.9 |$1367.0 |$1337.47 |$1220.28 |
|Current Ratio (times) |2.0 |2.26 |2.19 |1.84 |2.71 |
|Total debt to equity % |58.5 |-2.54 |2.67 |0.73 |1.63 |
|Profit Margin % |6.5 |-3.51 |9.31 |5.44 |-1.26 |
|Return on Investment % |5.2 |-5.08 |15.65 |6.05 |-0.96 |
|Return on Equity % |19.6 |-146.34 |69.92 |14.36 |-0.95 |
|Return on Assets % |9.6 |-4.20 |10.74 |4.81 |-0.86 |
|Inventory Turnover (times) |5.9 |4.66 |N/A |N/A |N/A |
|Market Capitalization (millions) |N/A |409.99 |372.29 |399.74 |422.90 |
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|Outdoor Sports Group |Industry SIC |Major Competitors Overall |
|Ratios and Growth Rates |3484 |Blount Overall |Pentair, Inc. |Bulova Tech. LLC |Crosman Corp. |
|Industry Rank | |3rd |1st |2nd |4th |
|Net Sales (thousands) |$1,949,750 |$809.9 |$1,937,578 |$95,890 |N/A |
|Current Ratio (times) |3.1 |2.26 |1.51 |5.05 |N/A |
|Total debt to equity % |36.5 |-2.54 |1.04 |0 |N/A |
|Profit Margin % |8.29 |-3.51 |5.17 |10.91 |N/A |
|Return on Investment % |7.2 |-5.08 |8.31 |10.21 |N/A |
|Return on Equity % |15.2 |-146.34 |17.03 |14.99 |N/A |
|Return on Assets % |9.7 |-4.20 |6.12 |8.71 |N/A |
|Inventory Turnover (times) |4.8 |4.66 |N/A |N/A |N/A |
|Market Capitalization (millions) |N/A |409.99 |1845.45 |80.50 |N/A |
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HUMAN RESOURCES
Blount International employs over 5,600 employees throughout its operations worldwide; none of the Company’s domestic employees is unionized while the number of foreign employees who belong to unions is not significant. With the acquisition of Federal, The Group dramatically increased the size of its sales force.
Why does Blount hire its managers from outside the company? Is this a strength or a weakness?
Executive Compensation: This executive compensation program was designed to attract, motivate, and retain the executive resources necessary in order to maximize shareholder wealth. The package provides levels of compensation that are competitive with those in various markets that Blount competed in for executive resources, as well as incentive compensations that vary with the financial performance of the company, and that effectively rewarded individual performance. The objective was to provide compensation between the 65th and 80th percentile of competitive market norms, while taking into account the individuals long-term value to the company.
Target Incentive: Blount pays cash bonuses to employees upon the achievement of business segment and individual performance objectives established for the fiscal year. Target objectives were weighted at 50% for pre-tax income, 20% for return on capital employed, and 30% for attainment of individuals’ performance objectives.
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Research & Development
Blount has emphasized the development of new products for specific applications that command premium prices. Company executives believe that customer satisfaction was the result of the producing goods that fit consumer needs better than rivals. The company’s goal was to have 15% of sales coming from products that had been introduced in the past three years. Expenditures for research and development were $8.0 million in 1997. The Sporting Equipment segment has also dedicated significant resources to improving product development. Efforts have included better gauging its customers’ needs, maintaining a large staff of engineers and extensively using CAD/CAM technology. As a result, the sporting Equipment segment has introduced over 100 new or improved products to the market in 1998. Strength or weakness?
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INFORMATION SYSTEMS
Blount presently maintains an information system responsible for strategic planning, policy development, business process developments and business systems planning. Strength or weakness?
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Questions From the Panel
1. How will moving into new markets impact our organization in terms of new acquisitions? Companies w/ strong growth rates versus companies with strong cash flow?
Companies with strong cash flows usually have been in the market for a significant period of time, making them harder to acquire and less attractive to potential buyers. In contrast, companies with strong growth rates are typically characterized as companies that have recently began operations and are more susceptible to acquisition. As the company’s mission is to make acquisitions that propel growth, Blount would benefit more with the acquisition of businesses that maintain strong growth rates versus high cash flows. The justification lies in the potential for growth; high growth rates combined with management shrewdness and synergies across the value chain promote increased profits and higher cash flows. In addition, the nature of (a company with a portfolio approach to growth and financial performance) the industry (late growth/maturity) would encourage firms to invest in businesses that offer growth; higher cash flow acquisitions are attractive to firms do not wish to absorb the costs associated to businesses in their growth stage. High growth rates also imply that a firm(s) is receiving increased market recognition and is gaining market share. Companies with higher cash flows may have established market share for itself but this does not imply that the company will experience growth internally, externally, or in terms of market share.
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Summary of internal factors
|Internal Factors |Strength |Weakness |
|Companies Competitive Capabilities |Blount holds core expertise in key area such as |Blount maintains a small customer base in |
| |corporate governance, which strengthens the |selected segments which gives exposure to |
| |company’s COMPETITIVE capability within a related|portfolio risk; Blount also maintains a weak |
| |diversified company, and engineering which |advertising/ marketing campaign, Blount does not |
| |increases the firms ability to manufacture; the |offer enticing promotions to dealers/ customers/ |
| |company has a high capacity utilization rate; the|blount lacks strategic alliances that could |
| |firm holds a key patent; the company maintains a |promote sales; presently Blount’s profit margin |
| |strong distribution/dealer network w/ strong |exposes them to price cutting tactics of rivals; |
| |brand recognition; the company creates synergies |exchange risks may reduce profit margins; |
| |across the value chain at purchasing, some | |
| |manufacturing, and at their distribution channels| |
| |rendering an opportunity to reach many market w/ | |
| |different product offerings; blount maintains | |
| |bargaining power over suppliers; the company | |
| |maintains emphasis on innovation | |
|Management's Personal Ambitions, Philosophies, |Blount’s corporate governance maintains an |N/A |
|and Ethical Principals |environment conducive to the company’s goal of | |
| |growth, and goes beyond and EMPHASIZES personal | |
| |growth, and civic involvement | |
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SOCIETAL, political, regulatory
|Factors |Industry Impact |Impact on Company |Opportunities |Threats |
|Economy |A strong economy will entice |The company should leverage |Blount will have the |Cyclical demands are a |
| |consumers to purchase new |their business portfolio to |opportunity to diversify its |material threat in terms of |
| |products/models; industry |include replacement parts |present business portfolio |economic conditions & |
| |will still be vulnerable to |and services in order to |into replacement parts and |nature’s effects, must be |
| |cyclical demands due to |offset cyclical demand due to|product services, which will |aware of capacity surplus, |
| |forces of nature. In weak |economic conditions, |offset some of the cyclical |especially in maturing |
| |economic conditions, |emphasis quality control, and|demand for outdoor products. |markets |
| |consumers will opt to |strengthen consumer/dealer |Increased consumer exposure | |
| |purchase replacement parts or|relations |will help secure good working| |
| |service their present units | |relationships as well as | |
| |rather than purchase new | |offer market insight | |
| |models or units | | | |
| |How does the international | | | |
| |economic condition and local | | | |
| |national economies affect | | | |
| |Blount? | | | |
|Political, Regulatory, legal |Due to unstable |Blount should emphasize it’s |In unstable markets where the|Higher prices for products as|
| |regulatory/political |international presence, |growth rate is highest, |a result of policies/ |
| |conditions in markets with |securing strong political, |Blount should use its strong |regulations may hinder the |
| |highest growth potential, |local, and consumer relations|market position in other |importation of Blount |
| |in/out bound logistics and | |venues to maintain |products into certain markets|
| |manufacturing costs may | |competitive pricing in order |or geographic areas which |
| |increase causing overall | |to establish market presence |will hinder growth/demand |
| |product costs to increase | |(loyalty/ recognition) where | |
| |(How will increased gun and | |other firms may be | |
| |environmental legislation | |discouraged from entering | |
| |impact Blount?) | | | |
|Technological |The demand for more |Companies will try to |Blount maintains strong |Failure to innovate |
| |technology innovation is |innovate present products, |networks which will assist in|technology will result in |
| |increasing as customers are |while keeping a low |forecasting consumer |loss of market share & |
| |more experienced, the rate of|inventory; market research |preferences; technology will |profits/sales; high |
| |technology is low and |will be essential, along with|gain market share for low |inventories can be |
| |products life cycle is |enhanced consumer relations; |switch cost products; company|costly-inventories should |
| |relatively long , technology |hire employees that enhance |will be able to maintain |remain as low as shifting |
| |innovation will earn market |core tech. competencies |advantages for significant |demands require, an important|
| |share | |time period; patents will be |patent can cause long term |
| |How will the increased use of| |key utility |decrease in product demand |
| |technology impact the pulp | | | |
| |and paper industry and | | | |
| |thereby impact the I&PE | | | |
| |industry? | | | |
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OPPORTUNITIES |Market size |Demand for new products |Increase in demand for present products |Related business ACQUISITIONS |High Entry BARRIERS |ability to capitalize on COMPETITORS weaknesses |growth in new geographic regions |high AVAILABILITY of suppliers |Economies of scale within markets |Speed of technology |threats |Market is highly competitive |growth stage: Maturity/late growth |Growth RATE: relatively low |Cyclical demand of consumers |shifting EXCHANGE rates |low switching costs |buyer bargaining power |government regulations/policies | |Expertise in key areas | | | | | | | | | | | | | | | | | | | | |strong brand name | | | | | | | | | | | | | | | | | | | | |high utilization of fixed assets | | | | | | | | | | | | | | | | | | | | |high volume of production | | | | | | | | | | | | | | | | | | | | |key patents | | | | | | | | | | | | | | | | | | | | |product innovation | | | | | | | | | | | | | | | | | | | | |MANUFACTURING adaptability | | | | | | | | | | | | | | | | | | | | |engineering expertise | | | | | | | | | | | | | | | | | | | | |strong DISTRIBUTION networks | | | | | | | | | | | | | | | | | | | | |large dealer networks | | | | | | | | | | | | | | | | | | | | |Weaknesses | | | | | | | | | | | | | | | | | | | | |small customer base | | | | | | | | | | | | | | | | | | | | |exposure to portfolio risk | | | | | | | | | | | | | | | | | | | | |weak advertising | | | | | | | | | | | | | | | | | | | | |weak promotions | | | | | | | | | | | | | | | | | | | | |lack of strategic alliances | | | | | | | | | | | | | | | | | | | | |HOME
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