UK Wrist Watch Industry | Marketing Strategy

UK Wrist Watch Industry | Marketing Strategy During late 2008 and 2009 confidence of consumer fell and people became more aware about their spending in watches and jewellery has not been immune to the economic climate. During 2005 jewellery and watches market grew by 10 % were it reaches to  £4.8 billion in 2010 and over next five year Mintel forecasts is 11%growth in watches and jewellery market. Hence 2011 is also going to be the year to invest in mens jewellery. Stephen Webster presented a strong case for mens jewellery at IJL in September 2010, and assuming male customer only want watches and the odd signet or chain could lead to missing out on a potential wealth of customer. Its not that male customers dont want it: they just dont know they want it. Men dont have thinking about what to wear as women do, explain Webster. But once a man is bejewelled, theres no looking back. They also dont wait for special occasions like woman do, and they can go from zero to jewellery enthusiast in no time. Market research company Mintels September 2010 report Watches and Jewellery Retailing UK found that 20% of male respondent said they like receiving jewellery as a gift, and 12% said that they had purchased all of their own jewellery. So the market is clearly there to be exploited. http://www.retail-jeweller.com/trends/in-with-the-new-2011-trends/5020089.article Rapid increase in gold prices and recession change many consumers mind to buy silver instead of gold, this trend is rising to nearly three in ten women with almost one in five people wearing silver jewellery than gold; particularly young people aged 15-24. Now days Consumers are willing to experiment and try new looks with little minimising their bank balances which means many costume jewellery items are affordable and easy disposable without denting their bank balance. Young aged under-35 is more open to pay large amounts for watches these are consumers who do not wear jewellery to express their individuality or to show their consumer spending power. As the research has should that 86% of consumers wear a watch, were 40% only buy a new watch when their old watch is broken. The new reason for purchase a watch could be watchs main function with health benefits as a new way of helping the consumer. http://oxygen.mintel.com/sinatra/oxygen/display/id=479809 Executive Summary: https://www.keynote.co.uk/market-intelligence/view/product/10331/chapter/0 Why buy me. Can be better explain by to fend off the competition by constant innovation, reinvigorate, recalibrate, update. Many brands and companies are continuously renovating their business and holding positioning themselves for growth. Positioning able offerings for brands and availability of product in the market. Several key target groups and users meet their needs as it reaches a certain mode of consumers and delivers benefits to them. Consumer and user are attributed by benefits and product as they are depended on how actual approach of a company or brands position communicates in the market place. As a result positioning or product of a company find one to keep further distance itself from competitors which is based on list of items, but very importantly in six key :, Distribution, Quality, Attributes, Product, Price and Usage Occasions. As compared to earlier times consumerism has undergone a sea change where the consumers are informed about the products. Hence, the market has become customer centric. Understanding the importance of customer is become the structure of business; in effects companies have started in regular basis i.e. repositioning exercise. In the recent times Titian Industries Ltd had a major brand repositioning exercise was planned more in order to provide more to its customers. Now the company holds new position. This study will help to understand the revived positioning strategies of Titan watches. An analysis of repositioning strategies of Titan also forms of the study. Firstly it is important to understand the overall wrist watch industry in UK. Secondly to study the brand positioning and re-positioning strategy of Titan wrist watches and to find out about the loyal customers of Titan watches as they are aware of the new positioning strategies of the company and how they used them. To study primary and secondary data have been used. Analysis UK wrist watch industry and brand repositioning strategies of TITAN Company has been analysed and completed on the basis of secondary data. Internet, journals, books and magazines have been used for this purpose. Project comprises conducting a questionnaire survey. (function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "https://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })() Introduction: 1.1 Theory and concepts: According to Peter Drucker A business has two and only two basic functions: marketing and innovation To maintain business relevance and market position, it is important to continuously innovate and invent brand image in the market to pace with change and intense competitive pressure in the marketplace. In this context, now days brand positioning and revitalization strategies have become a business vital part for battling brand erosion. Further heightened for brand repositioning is because of rising cost and high risk connected with launching a new brand in market. Increase in the cost and high risk related with launching a new brand that is a part of brand reposition. Brand reposition has received very importance in the marketing literature and treated as a difference of brand positioning. Reposition can be required as the market changes and new opportunities occur. In order to reach the customer which was never targeted at first can also be targeted with brand reposition. In order to change its image in the market it is important to focus towards brand repositioning, although it is one of the toughest and harder actions for repositioning of familiar brand in market. As per Solomon, essential part in the marketing efforts is position strategy because companies have to use the elements in the marketing mix to influence the customers understanding the position. There has to be several choices to be, so to as to be in more attractive and relevant position. It is important for the person who is reposition for the reposition to know and understand why reposition is necessary and its need, and if the offer is the one that will change or just the brand name. While repositioning it is important to undertake and understand all the risk factors that is likely to affect it in the market. A company risks its credibility and reliability more while repositioning its brand in the market and the need for a thorough strategy is very important to avoid any occurrence. Some analyst argues that to successfully reposition a established brand name is almost impossible because repositioning of a brand can make the most loyal customer to switch brand. If the brand is eroded then brand reposition becomes important. Numerous attempts to reposition brand in the market may fail which is testified by many company for example while soft drink has successfully been able to connect with the youth though they exist for 40 years in the market but at the same Levis, jeans has been losing its market share to newcomers such as The Gap despite numerous campaigns designed to reposition the brand trend. 1.2 Literature Review: The reposition strategy is defined into three stages that is: Introductory Elaboration Fortification This involves the introduction of a new or a repositioned brand, seeking underline the brands value over others, and to broaden the brand position. It is truly hard to change the customers perceived attitude towards a brand, and therefore the risk is great that the attempt to repositioning might fail. After rolling out the strategy, it is time to modify the proposition through update of the personality and through repositioning. There pros and cons with both of this segments and it is great significance that they are truly calculate when deciding the next step in the process. To understand it more deeply http://htmlimg4.scribdassets.com/55f3acalz4nfgla/images/10-81b5e3fa9c/000.jpg Figure 1: Stages in brand strategy development. When a company modifies or change something that is already there in the market established in the mind of the customer that is called as repositioning. Different profession and individuals have different meaning and understanding towards Repositioning. There are few different definitions and greater understanding about this concept: Repositioning is a change, principally about triggering the vision, mission and value in a new direction that is more suited f or the brand in the future- Brand manager consultant. Principally, reposition concerns changing the consumers perception of the brand PR consultant. Repositioning is built upon the change of unique and differentiated associations with the brand in some kind of direction; it is about having a balance between the category party and differentiation when using reposition strategies (Leading Brand strategies) From these definitions, it is obvious that reposition is about moving something to more attractive and relevant position. Reposition direction is often decided as to what a company wants to achieve. There is also a visible relation between price and quantity aspects. When a company perceives the market as a demand curve, the purpose is to down stretch or upward curve. When moving up and there is a need for reaching the premium segment and expand up wards. Figure: The principle of reposition. When striving towards a new position in the market, it is important to understand those consumers are limited. Peoples minds select what to remember and it is important to convince the consumers with greater arguments. The market always strive for change which is rapid and therefore repositioning can be necessary to meet these demands, newer and stronger arguments have to be established to convinced them to stay as loyal customers. As repositioning is a very complicated matter and therefore there are no detailed theories or models. Aim for repositioning is different for different person, and the only connection between all the different theories is that repositioning is moving something from somewhere towards a greater position at the market. Corstjens and Doyle (1989) identified three types of repositioning strategies: Zero repositioning, which is not a repositioning at all since the firm maintains its initial strategy in the face of a changing environment. Gradual repositioning, where the firm performs incremental, continuous adjustments to its positioning strategy to reflect the evolution of its environment; and Radical repositioning that corresponds to a discontinuous shift towards a new target market and /or a new competitive advantage. After learning the repositioning of several brands from the UK market, the following 8 types of repositioning have been identified. These are: Increasing relevance to the consumer Increasing occasions for use Making the brand serious Falling sales Bringing in new customers Making the rand contemporary Differentiate from other brands Changed market conditions A four phased brand repositioning approach can be followed to achieve the intended benfits- Phase I. Determining the current status of the brand Phase II. What does the brand stand for today? Phase III. Developing the brand positioning platforms Phase IV. Refining the brand Positioning and Management Presentation The advantages that can be derived from brand repositioning exercises can be summarized as: Value over others Updated personality Relevant position The risks associated with such strategies are: Loss of focus Neglecting original customers Losing credibility for the brand Confusing the brand Therefore, in order UNLEARN the brand positioning one must help the customer to know brand repositioning in more difficult than initially positioning. This can be done by: Carefully crafted communication New products, packaging Associations with other brands ( co- branding, co- marketing, ingredient branding, strategic alliances, etc) that reinforce the new brand positioning. This exercise is so critical to an organizations success that the organizations and leader in marketing/brand management should develop skill preferably with the help and facilitation of an outside brand positioning expert. Research Methodology: 2.1 Objectives To study the current scenario of UK wrist watch industry. To review the brand positioning strategies of different sub-brands of watches. To analyze the brand repositioning strategies of watches. To study consumer awareness and perception about the brand repositioning strategies of watches. This study will help to understand the gap in its communication strategy regarding brand repositioning exercises and the further measures to be taken for effective marketing communications. 2.2 Limitations: The study is confined to London area only There is possibility of sampling errors in the study The responses of the consumers may not be genuine Questionnaire may not be comprehensive 2.3 Sources of Data Collection: The relevant data was collected from both primary sources and secondary sources. The starting point of my information gathering has been the secondary sources such as internet, books, and journals and so on. Firstly, brand positioning and repositioning strategies of Titan, secondary sources such as internet, insurance magazines, and journals and so on. Then I conducted a consumer awareness survey on brand repositioning strategies undertaken by Titan watches in recent times. 2.4 Sampling: To conduct sampling of 50 loyal consumers of Titan and in the age group of 20 30 years for this study. Since Titan has taken up brand repositioning strategies since January 2011, consumers who have seen the previous and new campaigns have been targeted. 2.5 Primary data: Data was collected through an interview schedule, consisting of both open ended and closed ended questions. It consisted of the parameters like reasons consumers brand preference, recollection of earlier tagline and advertisement, brand ambassador of Titan awareness of new tagline and campaign featuring sportsmen and actors from International body and so on. The data was collected through e-mails, telephone contacts and one to one personal interviews. Industry Overview UK Watch industry: In 2004 and 2008 market report examines the jewellery and watches market in UK were fluctuated and fell by 2.8% and finish at  £4.33 billion in the review report. Large declined in 2008 contribute to the global economic downturn and UK recession which adversely effected nearly all UK industries. The only unaffected by the downturn was the luxury end of the market end, but by the 2008 and 2009 it begun to take effect on it. In recent year the jewellery and watches become increasingly competitive. Although this market have wide range of suppliers and retailers also online retailing have contributed highly for transparent for information on pricing and availability of products. This was a positive trend for small brands that was previously unable to deal with consumer directly. Some larger retailers and few independents have developed their transactional sites to deal with their consumer demand. The product which have high rate of consumer penetration with around a third of the UK population owning piece jewellery and watches. In 2009 downturn in UK economy shows that it will affect all areas of consumer spending and unlikely to show reversal in near future. It seems the concepts of a wrist watch have become that of a status symbol rather than a practical chronometer. According to a survey that suggest one in seven people in the UK has no need for watch, apart from as a fashion accessory. Gadgets such as iPods, laptops and mobile phone, represent threat to the watch industry, survey conducted by Mintel. Even in the age of iPhones, people spend huge amount of money on a quality time piece, with high-end brands such as Rolex and Tag Heuer adorning blinged up wrist of rappers, bankers and fashionistas alike. http://www.wharf.co.uk/2010/11/why-wrist-watches-are-dialling.html SWOT ANALYSIS OF THE UK WATCH INDUSTRY: Strengths: Watch industry is growing industry which faster rate As the population is rising, the watch market is also expanding Customers are not very price sensitive as far as quality watch is concerned Weakness: There is not much advertising done by watch industry No innovation in products There are few number of exclusive showrooms that reduces the consumers accessibility to the product There are few marketers, who are concentrated only upon a particular niche segment (Tag Heuer ) Opportunities: There is more need of fashionable luxury watch and fine luxury watch brands that can be targeted in UK, as customers are more like trendsetter and fashionable. UK especially London is a metropolitan city which makes it more attractive for the new company. Youth are more brand conscious than their predecessors. That leads to the expansion of the market for branded watches. Threats: There are many foreign players entering in the race Too many players will dilute the market and the profit margin. Mobile phones acting as substitutes of the watches. The Indian watch industry began in the year 1961 with the commissioning of the watch division of Titan. The first watch model manufactured by HMT was the Janata model in the year 1962. HMT was the leader in the watch market till the Tatas formed Titan watches in association with Tamil Nadu Industrial Development Corporation in the year 1987. They took a major strategy decision, which later changed the face of the Indian watch market to manufacture only quartz watches. Liberalisation in 1992 and removal of quantitative restrictions due to WTO has opened the doors for many the Indian market viz. Tissot, Swatch, Omega, Rado, TAGHeuer. The import duties on watches are falling which makes the Indian market look attractive for the global majors like Casio, Swatch and Citizen. Company Profile: Overview Titan is one of the largest watch producer in India and sixth largest in the world. Titan manufactures over 7 million watches per annum and have 65 million customer. In 1984 titan was established as a joint venture between the Tata Group and Tamil Nadu Industrial Development Corporation. Manufacturing in a state- of -the art at Hosur, Tamil Nadu the company brought the large change in Indian market, by offering quartz technology with international styling. By understanding the different segments in the market, the company launched its second brand Sonata watch, as value brand for those who like styled watches with affordable prices. In last two decade the company has build an very good impression in watch business to become Indias largest manufacturer and world largest sixth manufacturer of watches. This was mainly because good formidable distribution network. Being one of largest retail chain of exclusive retail showroom for watches called The world of Titan spread over 100 towns. Titan have branches over 30 countries, its also have multi brand outlets named Time Zone, service centres and dealer outlets. The company has watch plant at Dehradun (UP) and Baddi (Himachal Pradesh) and electronic circuit boards in Goa. The promoters held majority stake of the company, with Tidco having 28% of the shares and Tata Group companies owing 25% of the shares and the public sharing holding around 28% in the company. The rest of the stake held by the foreign institution, non resident Indian, mutual fund and other institution. It also acquiring a license for global brands such as Tommy Hilfiger and Hugo Boss, while. It has also in its portfolio its first Swiss Made watch brand Xylys. In 1995 the company capitalize to brand Tanishq as diversified into jewellery in fragmented market operating no brand in urban city. Also in 2005 the company launched its second Jewellery brand, GoldPlus, as using its opportunity for capitalizing in small town and rural India. Its also diversified into fashion Eyewear by launching Fastrack Eye Gear sunglasses as well as prescription eyewear. TITAN WATCHES: BRAND POSITIONING STRATEGIES Overall strategies: Since from the beginning Titan has been positioned as a premium brand, because its high quality products for its customer. Titan is struggling to have a strong brand image in UK market due to its numerous sub-brands that caters to different segments in India. It follows different positioning strategies; these strategies can also be analyzed as given below: Attribute Positioning: The company launched first quartz watches to Indian market as its product. The company successfully penetrate the market by this launch, under this strategy came Raga, Classique and Regalia. Classique positioned as style corporate wear that leaves a quiet definite impression and qualities of function. Regalia ranger represent the elegant-wear. Raga is an exclusive watch as positioned. The Raga and silver Raga collection of style, delicate and feminine with each piece unique truly. User Positioning: Titan provides to several user groups children (the Dash), sportspersons and adventurers. The fastrack range is seen as being modern and related to present time, reliable and sturdy. The advertising, packaging and merchandising of this range is young, cool and vibrant. Benefit Positioning: Titan offer many deals to differentiate its offering on the basis of superior style and attractiveness which is offered by Digital range fastrack. Competitors Positioning: Titan had to encounter the threat with the entry of several foreign watchmakers into the market; most the entrants are catering to the upper end of the market Omega, Cartier etc. Quality or Price Positioning: In the overseas market, especially in Europe where it is competing with Swiss and Japanese watches, it is position itself as value-for-money (less than Swiss watches and higher than Japanese), by giving attractively styled and of good quality. TITAN WATCHES: BRAND RE-POSITIONING STRATEGIES FOR GLOBALISATION Titan has managed to get fair market in Middle East and Africa but its failure in Europe was a downturn for the Company as the return was not as good as investment made for the expansion. Titan has decided to revamp its flagship watch brand in Europe mainly in UK. Titan wants to reposition it more youthful and relevant to the changing times. Titan has entered the International markets in 1989 through the export of watch movements. Titans first global footprint was placed in the UAE the largest market in the Middle East then it moved towards Egypt, Oman, Saudi Arabia and few markets in Africa. Though it faced strong competition, it reached the sales of 100,000 watches within a year of its launch. It started to move globally and moves towards Sri Lanka, Bangladesh, Maldives and Nepal. After its extensive survey, it concluded that it needs good reason to stock the brand. Titan needs to re-position its brand image in the UK market. And so Titan decided to against soft option of driving its globalization through private label exports. It would launch its product under its own brand with market positioning Therefore Titan found a massive advertising campaign to create brand awareness. It also participated in the fair which showcases the worlds biggest watch brand in the world. http://www.moodiereport.com/images/luxury_watch_tables_jan10_04.jpg http://www.moodiereport.com/images/luxury_watch_tables_jan10_05.jpg CONCLUSION: The suggestions to improve consumer awareness about brand repositioning strategy of Titan are as follows: To increase its visibility, Titan Company can sponsor events similar to fashion shows which all latest designs launched are displayed. This is important as it has a great effect on different segments of the customers in different ways. It is important to have Tie up with radio channels and television to broadcast and telecast its advertisement about various sales promotion from time to time. RD needs more investment as customer expectations are changing rapidly. It should focus more on introducing more varieties and luxury items in the market at regular interval. Introduce exclusive collection for working women which is more contemporary and complements any fashion styles. Tie up with international watch brands to make the product stronger in the market. To use internet to spread awareness among consumer about the brand. (function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "https://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })() Terry Hills framework: Corporate objectives Terry Hills framework: Corporate objectives Friction materials is enjoying a new lease of life as seen by their ability to make substantial profit partly due to the renaissance of the motorbike (scooter) as a source of transportation by the middle aged. Thus the corporate objectives are: Gain market share in the OE market through manufacture and supply of DBP in 2 years. Entering the Far East market as a Long Term Strategy to increase profitability and to wrestle for International Market Share in 3 years Superior Product Performer thereby securing the contract on a Long term Basis Improve Research and Development for the OEM for incremental business. Increase ROCE to 30% 3 years. Increase Profit Margin to 30% in 3 years. Increase ROI to 40% in 3 years. Order Winners and Qualifiers Criteria Discussion of the Criteria and the Implication for Operations BRAND IMAGE This is true for the motorcycle manufacturing company as demonstrated by their attention to detail and their strong Quality Policy and culture. It is therefore pertinent for Friction materials to maintain their already lofty heights of Quality to be able to tap into the sea of opportunities of OEM. For the AM, it is a guide to the potential customers of the qualities attached to the brand. With a Quality rating in the industry, the brand image does help win some of the customers over to the product range. For the SM, Brand Image could play a role in the choice of the DBP because the customers may want the best quality DBP for their automobiles which would help in marketing (word of mouth). This is a strong basis for our core competency being retained rather than outsource. COST For the OEM, Cost is the major order winner here as the company has to be highly competitive on cost to ward off potential competitors from the market. But with the prospect of Research and Development for new ways of making DBP, Friction Materials would be able to charge pre For the AM, Cost is highly competitive as well. The company must be able to get DBP to the market at affordable prices as the company has to be highly competitive on cost to ward off potential competitors from the market. For the SM. Cost is not competitive and almost not relevant. The cost of the DBP should be reasonable enough and not charge ridiculous amounts though the customer is willing to pay for the value of the DBP. Q QQ QQ: Performance quality flexibility in design dependability and volume are sensitive order qualifiers such that a drop in one of the characteristic specification could cost them the order. These criteria are key to their winning over the OE market thus we have a QQ which denotes (order loser). On the long run (3 years on) some of the values would change because Friction would have acquired a certain volume of market share and the direction of the market would tend to shift. For instance with a breakthrough in RD, the value of design flexibility and cost would change. This signifies that For design flexibility, it would be a new order winner, a display of our competency and thus they would be able to charge premium price, or at least increase the price of supply. Cost would be a dominant order winner as competitors would seek to drive down cost hence stiff competition. On the other hand, Q is not as sensitive as QQ. You would not lose the order if you cannot meet the demand. For Instance the durability of the DBP is a qualifier because it must be able to perform for a period of time but not too long to be considered absurd. 2 years is good but no one would want to design DBP for 10 years so if the life span of 2 years is attained then it is fine. For instance delivery speed is not required as you would have agreed to sign the deal to deliver at an agreed period failing which you would be fined. MARKETING STRATEGY SWOT Analysis Strengths Credible supplier network Modern managerial input Good debtor to creditor days Good current Ratio; indicates cash flow Ability to expand current location Centralized location to market and to ports for export Fully depreciated machine cost, hence they machine cost  £0 Skilled Labour force as can be seen in Specialist Manufacture Brand Image recognition for quality Close relationship with the tool specialist fabricators. Weakness Inventory levels Friction between top management (cronton and whitson) Long changeover period on press machine Poor personnel management Poor use of work packages leading to unused raw materials Underutilization of MRPII systems Inability to do online payment Poor space utilization Over reliance on entry into OE market Opportunity Potential global leader in OEM Local sourcing of materials (when they gain social status) DBP direct supplier to industry manufacturers thus increasing market share Expansion of production range Threat Competitive Labour Market Stiff competition from the Far East Potential Environmental threat on noise and waste disposal MARKETING STRATEGY Expansion of Market channeled to an increase in both local and global supplies of DBP. Revolutionize the OEM to a Quality competitive market based on cost management. Improve Research and Development capabilities After sales customer feedback as a way of getting closer to the customer and improving on quality and performance. MANUFACTURING STRATEGY VERTICAL INTEGRATION This is the level of incorporation in a supply chain for the various stages of the supply process. It could be forward or backward integration. A vertical integration could be to bolster the technological front based on competition or for to emerging markets. Make / Buy: The make or buy analysis is a strategic analysis that helps top management to decide what they want to produce, what they want to stop producing or what they want to outsource to a third party. In practice, core competence is not outsourced because that is the uniqueness of the product; if you let it go, you could just be setting up future competition for your company. The various decisions taken and the reason are as follows; For the supply of raw materials; a single supplier was preferred. This would prevent re-testing for the quality of the supplied materials as the testing phase takes a couple of weeks to get the right mix for the required braking performance. This would increase lead time and consequently reduce the ability to deliver on time. It also helps reduce the variation in quality that could arise from multiple sourcing For the mixing operation, that is the core competence and could be detrimental to the growth and the corporate objectives of the company. For the Press Operation, the Press tool manufacture is done by a local specialist firm. This could lead to delays in taking up the tool fabrication hence building up lead times for the OEM. When the design team finishes the design, they would have to wait for the Press fabricators to be available to work. Communication gap is also a threat to the smooth running of the design of the tool for the OEM. The specialist firm is also prone to take over by large BP manufacturers who are direct competitors and once competitive advantage is lost to them, it affects the market share of the OE and consequently the ability for Friction Materials to compete. Thus the decision is to Vertically Integrate the Local Specialist; this helps build competitive advantage in the OE market. For the baking operation, it would be kept in house. Outsourcing baking increases the time the operation takes; from 3 hours to a potential 5-6 hours. The cost of transport, labor and the payment of the operation together with the time trade-off make it very complicated and unsuitable for outsourcing. The chemical properties of the brakes at high temperatures could be altered during transportation and thus could lead to a failure in testing which results in the company losing the order. It is therefore a critical operation in-house and not outside. For the machining operation, the decision is to be kept in house. This is because an automated 100% dimensional check is required after machining. If you machine in house, there is a greater chance of achieving that accuracy than to outsource to a specialist that could be overlook little details that could lead to test failure. Since the machines are running at full capacity, an extra machine is required for the OEM manufacture. The machine would be second hand quality as accustomed to the company. The fully depreciated machines make extra budget available for this purchase and would in no time be fully depreciated as well. Thus we practically are paying less to do more. For the painting, the operation would be carried out in house. The reason is to be in control of the goods produced. Also the painting operation is a low skilled task hence a contract staff could be employed for the sole aim of painting. This helps specialization on the long run and reduces costs due to transportation and material handling. It also reduces labor cost as the company is only bound by the contractual agreement without benefits. For the packaging, the short term objective would be to continue in-house but re-brand the lot size so as to accommodate more DBP. This reduces the burden of having to pack several hundred of DBP at any time. The lot sizes could be increased and standardized as there is no obligation to supply with the current range of boxes but simplifies the current packaging operation. This helps reduce the number of boxes supplied for packaging and hence the time and cost of transportation and material handling. However the long term plan would be to source for a packing company that would agree to package as close to our production site as possible. This helps free up space for increased production and other value added work. FACILITIES The design of the operation would take into consideration the item to be produced, vary the different possible ways to produce it and come up with the best and most efficient way of producing it. The characteristic of the operation is determined by the 4 Vs VOLUME HIGH LOW HIGH LOW VARIETY LOW HIGH VARIATION LOW HIGH VISIBILITY The OE market involves long production runs with product specification and low variety, there is need to implement a high volume low variety manufacturing process which is the category of the OE market. Volume: This is the production capacity within a particular time frame. The volume is set prior to production in order to plan for capacity. The current forecast of 150,000 in the first year is a high volume compared to the normal few hundreds that are currently produced. Therefore it is a high volume process operation and adequate capacity should be provided as required. Variety: this can be described as the different combinations of products that a production process can accommodate. There is limited variation in the demand of DBP for the OEM due to the standardized requirements. Basic changes can be made in the design but it is practically the same spine and technology that is used. This depicts a low variety production. Variation in Demand: This is the ability of the production process to change with little notice to the forces of demand and supply or product design and specification. Orders are requested a year prior to production thus a stable demand profile which makes effective capacity utilization probable. Therefore it is a low variation demand production. Visibility or Customer Interaction: this could be described as the level of participation of the customer in the production process. The ultimate goal of any production of the process is to satisfy the customer. Since the customer is not expected to be at the factory every time, we settle for a low visibility production process. This has no bearing on the type or quality of DBP produced as the company would be ratified fit for the production of the OEM before proper production can commence. Location The current location of Lutterworth is perceived as a central location both to the potential and to the international market. The town has a rich history of manufacturing work and is in a central location for transportation of finished goods and raw materials and assess to the factory very easy. It is also close to a large motorcycle manufacturer who is the potential customer. This is an ideal location for a growing company and the rate of development could become attractive for immigrants due to the emerging facilities. TECHNOLOGY Product Profiling The product profiling approach is an analysis understands the requirements for production and the characteristics available for each process to meet production specification. A comparative analysis helps in process choice the layout structure to adopt. Original Equipment Manufacture would be done through the batch production process. The process type helps utilize the standardized production format due to low variety. It also helps improve the efficiency of production and spreads the overhead costs over more units. The Specialist Manufacture is a jobbing type process while the Aftermarket production is Batch Production therefore if we go for a flow line production process; it would impede our production process. Thus if for OEM, a flow line is chosen then Specialist Manufacture must be outsourced to compensate for the complexity of the production process. However the Specialist manufacture is the core competence of Friction Materials and to let go of it would be synonymous to throwing your market share away. If a competitor comes by and vertically integrates that section of your company, then there is a potential buy-out of Friction Materials. Therefore it was sensible to use a flexible Bach production process currently which could move into a flow production process with enough investment to justify the resources required to change it. Process Choice Project SPECIALIST PARTS AFTER MARKET Jobbing ORIGINAL EQUIPMENT Batch Line Continuous High Volume Low Alex and Terry Hill 2009 Volume High Low Low High Low Variety Fixed Position Process Cell Feasible Flow Product High High Low Regular Flow Dr Watt 2010 However, for a long-term capacity planning, investment decision and availability of funds could make OEM be more flow line suited. This occurs when there is a huge volume to justify the investment and good forecast of an emerging market hence a growing demand and a comfortable market share to control. The OEM batch process tends towards the flow line production section. Process Choice SPECIALIST PARTS Project AFTER MARKET Jobbing ORIGINAL EQUIPMENT Batch OEM Line Continuous High Volume Low Alex and Terry Hill 2009 CAPACITY A capacity strategy is a review of how the personnel would work effectively with the resources and machinery available. For the OEM, there is a predictable demand known a year prior to production, hence a level capacity strategy typifies the production. There is no lead or lag in production and demand hence the make to order plan. LEVEL CAPACITY PRODUCTION The capacity is set at 3000DBP per week at standard working week of 40hours. This helps both capacity and personnel utilization and a tight budget schedule. If there is a change in capacity planning, shift hour or overtime can be used to compensate for such. However this plan is for the current production target of 150000. INFRASTRUCTURE HUMAN RESOURCES These are specialists in the area of recruiting people for various job functions. From a manufacturing point of view, an IE is the right person for this task. This is because he has been trained to understand the right work contents the workforce required to achieve maximum capacity utilization and the performance measurement attached to each job function. However the HR specialist understands how to tie the salary structure and the benefit (both money and material) attached to him. Therefore the strategy would be to employ the unskilled workforce and train them to a basic minimum skill level required to do the basic non skilled operations like printing, packaging and painting and machining while we use a higher wage structure to lure the skilled workers; should we need them. The unskilled workers could be temporary workers or permanent workers depending on the requirements while the skilled workers would be made permanent to increase core competency. Periodic training like safety and their specific job functions would be necessary to update the level of skill and technology across board. PERFORMANCE MEASUREMENT THE BALANCED SCORE CARD It is a framework that converts the vision of the company into performance measures that can be interpreted and monitored. The mission statement should thus be seen as the action plan that drives the company on the journey to the destination it hopes to achieve in future. LEARNING AND GROWTH FINANCIAL PERFORMANCE CUSTOMERS PERCEPTION AND EXPECTATION INTERNAL STRUCTURE AND INFRASTRUCTURE STRATEGIC OBJECTIVES Fig : The balanced Score Card Slack, chambers Johnston 2007 Strategic Objectives Strategic Measurements Core outcomes Performance Drivers 1 Financial Increase Profitability Increase Revenue Project Cost Reduced Cost Compete Based on Cost Operational Efficiency 2 Customer Increased market share Share of segment % presence in the OE sector Customer satisfaction Customer feed back % satisfaction, positive feedback 3 Internal Revenue mix Research and Development collaboration Prototype designs success rate Increase ROCE High ROCE Higher utilization of resources 4 Learning and growth Employee capability Staff productivity Reduced scrap rate Upgrade of facilities Systems Audit Improved cycle times Adapted Balanced Scorecard, Kaplan and Norton 1996 Financial perspective Growth: The dream of every business is growth; and so is Friction Material. The growth of the company is the gate way to expansion in other markets and could be a factor in increasing the Market share which has been set as at 2 years. Increased Profitability: The profitability of a company is its ability to satisfy the demand of production; output, overheads and cost of production and still make a margin. Most businesses are set-up with an aim to make money; either primary or secondary. Friction Materials made profit this year and the OEM is a lee-way to guarantee constant volumes of production and with a high efficiency system, the OEM would be the source of revenue for the company. This is because the OEM has a huge potential to turn the fortunes of the company around from a small company to a Large company with huge revenue and large market share. In an emerging market like the OEM, the first to enter the market usually dominates a great percentage of the market share. Therefore it is pertinent for Friction Materials to be in the market as one of the pioneer members. The OEM would generate huge revenue as they have a huge volume of production thus reducing the cost accrued to the production costs and overheads and consequently drives d own the cost of production and hence increases profitability Profitability of the OEM is vital to the existence of the company as it helps to generate a funds through production that could be ploughed back to the operation of the other product range and with good decision making and investment policies; the company will be transformed into a World Leader in the manufacture of DBP. Profitability of the company also helps it satisfy its personnel commitment; paying of salaries and bonuses to the workers for increased motivation. If a business is not profitable, the management of the company could struggle to pay wage and this would ultimately impact on the shop floor reducing the productivity of the workers; as most workers would lack the motivation to continue work without pay. Ultimately the customers; the motorcycle manufacturers would get affected as Friction Materials could end up not meeting the demand target and are imposed heavy fines. Gradually the company would lose its competitiveness and could end up being bankrupt if it continues to fail to meet the target. The contract would be cancelled and the production would be hampered. The end result could be the administration of the company, since it cannot meet its basic obligation. Cost Reduction Sustaining growth is all about meeting the expectation of the shareholders, those responsible for the investing money and time to the success of the company. In Sustaining the growth of the company, good asset utilization and cost reduction policies like getting depreciated machines to work effectively, helps to reduce the overheads and unwanted cost attached to the daily running expenses of the company. The OEM is a cost-competitive market and imploring a strategy to drive down cost is worthwhile. Trade-offs associated with low cost production should be properly weighed before decisions are made else it could eventually cost more; both for the cost of rework and the excess and unnecessary man-hours used. For instance, if the cost of a standard back plate is $10 and you get a supplier for $6, it is possible that the manufacturer might not be able to meet production target. So if you hire him for your supplies and he fails to deliver, in panic, you might need to get another supplier w ho would end up charging you more than it would cost and you might have to run extra man-hours to cover up for production time lost. All these could cost more compared to the stable $10 who is guaranteed to deliver when needed. Customer Perspective Increased market share The market share is a portion of a business sector where you dominate. In reality, big companies like McDonalds have almost all the market share between them leaving the remaining for smaller companies. The idea is that every company sells a particular volume of the product in the market. Companies with dominant shares sell high volumes of stock periodically. Friction Materials has market share as one of its targets because it aims to be a profitable business. If they can churn out large volumes of DBP and exhaust their production capacity in terms of sales; then they would be able to get the overhead cost driven low. This helps put the Cost reduction strategy in check and increases the viability for profit making. A large market share increases the brand image of the company and opens doors for wider reach to the Far Eastern and Global markets on a whole. It also helps increase the possibility of dominating the Local market. Based on the operational capabilities of the company and the entry into the OEM market, Friction Materials could boast of a sizeable market share so far as other factors are favorable. With percentage market share dominance, plans like marketing drive sales promos and exhibition events like auto fares can be used to boost their brand image and ultimately sell the product to the market. The market share volume determines the amount of profit and volume of DBP that could be sold over a period of time. Customer satisfaction Customer is king, should be at the back of the mind of every employee of Friction Materials. This is because the customer makes it possible for the employee to be paid; if the DBPs are not quality ones or the customers are not satisfied, they could easily turn to a competitor and this affects the market share of the company. Since we regard the customer as king, and production is based on customer needs; it is imperative that Friction Materials delights its customer base by going the extra mile to meet with them, to have a personal experience with them. This helps the company reach out to potential customers and at the same time get a good understanding of the performance of the DBP in the market and ways to improve the current production specifications and designs without altering the standard specification requirement for manufacture. It also helps identify potential areas of strengths and weaknesses as emerging opportunity that abound but have not been fully utilized. For the OEM to succeed, the customer must be delighted exceptionally and satisfied with the unique qualities of the DBP else Friction Materials would lose ground to their competitors and could lose their competitive advantage to poor human relationship. Therefore the company should make the customer the aim of the production process and in pleasing a customer that could be a potential chain of new customers. It is widely said that it costs a lot to get a new customer compared to retaining one of them. Thus it is more profitable to secure already existing customer base by delighting them exceptionally while looking for incremental business than to look for more business and neglect current customer base. Internal Process Perspective Research and development For Friction Materials to remain relevant in the OEM, the RD team would be expected to design and develop new lines for production. The ability to meet this requirement is one of the basic tasks of Friction Materials as an OEM. Therefore it is an important aspect of the company that needs to be restructured. Currently, there is no department for RD and since it is a major requirement by the contractor, a new R and D department be formed. The design engineer as well as the local specialist firm that was integrated needs to be incorporated in this department to work together for the progress of the company. A good R D enables breakthroughs which can yield huge revenue. Similar to this is the Astra Zeneca R D who charge premium price for discoveries in their RD that are able to sail through to the production stage. RD also increases skill level of the company and takes the competitiveness to a higher level. Thus it gets to a point where they could re-define the characteristic qualities of performance of DBP as seen by the 5 seconds telephone response employed by Zenith bank to attend to customer enquiries. High ROCE: A high ROCE for Friction Materials signifies a good balance of employee strength. The ROCE is a financial tool used to understand the extent of effective utilization of resources. If the employees are trained well and given the right resources to work with and appropriate incentives and benchmarks to go with, then they would be well motivated to achieving company targets. When the targets are met, they can be used as benchmarks to be built upon. With a steady growth rate in ROCE, investment on raw materials, machines and personnel would be justified. Productivity, efficiency and proper scheduling of the production process are the hallmark to achieving a high ROCE. An Acid test ratio can be used to measure the liquidity of the company, the more liquid a company is; the stronger it is. Thus using a benchmark as a source of strength makes the top management of the company a focused one. Growth Employee capability reskilling people Upgrade of facilities buying new machines ORGANIZATION The organizational structure of Friction Materials should change from a process based leadership to a functional matrix organizational structure where the operations personnel have easier access to top management for decision making and policy formulation. For a small company like Friction Materials, the Organizational hierarchy is very visible. Too many management port-folios or positions; as is seen here, creates a communication problem such that escalating issues or problems as seen on the shop floor could take a while before it gets to the appropriate table and this makes flexibility very low. If friction arises between the managers, it could trickle down to the shop floor. Besides there is unclear definition of roles and responsibilities and this is a potential disaster because of the ownership of responsibility for failure or damage. Thus instead of creating an operations unit, they are building a potential silo. This hampers effective communication between the operations crew. The dual role for the sales manager could also be detrimental to the progress of the company as there might be sub-optimization of the sales department and biased decision making; should he be in contest with another manager. There should be a common focus of top-management on the direction, aims and objectives and the vision should be shared collectively. Time out on team building and holiday trips could be scheduled to help foster relationships of employees of Friction Materials. Having grudges against people is a reality of life, but when it affects the productivity of the company, it becomes questionable. Job roles and functions should be well defined and the performance; measured. This helps make the workers responsible for the daily activities and could improve productivity. A good reward and compensation scheme (bonus) could be employed but it must be properly structured to avoid sub-optimization of departments or resources. PRODUCTION AND PLANNING CONTROL The planning and control system of Friction Materials Ltd is the MRPII but is underutilized at the moment as there is no skilled clerical worker that can handle the software. The clerical workers need to proceed on a flexible training schedule to learn the latest version and application of the MRP II system. There should also be an online order and portal system where purchase orders and payments can be made and reduce the over reliance on the telephone order or fax as there could be ambiguity in communication. The capacity planning features of the MRP II system was not in use and the WIP records for an on-going production process is not recorded which makes it almost impossible to be able to plan for adequate capacity and schedule for raw materials hence the high inventory levels. A kanban pull system can be implemented for the production of the OE market to meet production targets until a full scale imp