OverviewA well-established highly-recognised Australian engineering and manufacturing company with a long history of growth is looking to explore new markets in newly Asia’s emerging economies. You are to choose three markets (three countries) to investigate and carry out preliminary analysis of these markets in terms of market profit potential. You will produce a report with a recommendation on the best market to expand to as well as a specific action plan to boost sales and marketing in this market. You have to determine the best way to incorporate production from these new production lines horizontally/vertically into the global production of the company.You should pay special attention to the potential risks associated with these markets in the analysis.
School of Management — MANU2470 Assessment 2: Report Assessment Type: Report (individual) Due date: Sunday of Week 5 at 23:59 (Melbourne time) Weighting: 40% Word limit: 3000 words (+/– 10%) Length: N/A Overview A well-established highly-recognised Australian engineering and manufacturing company with a long history of growth is looking to explore new markets in newly Asia’s emerging economies. You are to choose three markets (three countries) to investigate and carry out preliminary analysis of these markets in terms of market profit potential. You will produce a report with a recommendation on the best market to expand to as well as a specific action plan to boost sales and marketing in this market. You have to determine the best way to incorporate production from these new production lines horizontally/vertically into the global production of the company.You should pay special attention to the potential risks associated with these markets in the analysis. Learning Outcomes CLO 3 Integrate effectively the engineering and technical skills that exist in different parts and locations within an international organisation CLO 4 Apply your knowledge in relation to issues affecting international operations of their firm to strategic decision-making and tactical problem solving process. Page 1 of 9 Assessment details This assignment focuses on a fictional Australian engineering and manufacturing company called TSA Pty. Ltd. (TSA). TSA is a global leader in the food packaging and processing industry, supplying turnkey solutions and single systems to customers around the world. Your task will be to familiarise yourself with the company and then investigate and comment on specific questions relating to the company’s international operation and expansion. Company background TSA was co-foundered by Ald and Nataly Wood in 1982 based on the original idea of Nataly Wood. When TSA started it spent much of the 1980s installing machines for Australian potato crisp manufacturer Poty’s. In 1989 the company entered the UK and started to earn its first overseas revenue. TSA’s business is based on the development of innovative packaging equipment. Ald Wood the company’s managing director was originally an engineer, who had experience working in the snack food industry. He worked with food manufacturers previously which had given him a detailed knowledge of the food packaging business. He worked on developing packaging machines that incorporated a unique stripping action using rotary continuous motion jaws, to generate an output of bags more than double the industry average. According to Wood, the decision to go international was made at the same time as this innovation was conceived. It was felt at the time that developing a global business model would be relatively easy. However the development of the packaging machine proved much more difficult than anticipated due in part to a number of design faults in the machine. A break through ultimately occurred in 1986 when Poty’s took a risk and place an order for a large number of the machines. Installation commenced in 1987 but involved major problems for both TSA and Poty’s. As Ald explains: We have serious problem in our processing. The software was stopping many times during the day, machines just refuse to work. We will spend two years, from 1987 to 1989, to resolve all of these issues. The prototype machines had been installed in Poty’s brand new facilities in South Australia. Poty’s were heavily dependent on TSA and continued to fund them for two years to fix the outstanding problems. By 1989 the machines were fully functional and TSA was now a $5M company with 20 employees. TSA has grown from a small Australian company into a large organisation with operations in over 12 countries across the world. With a history spanning more than twenty years, TSA has grown from a packaging machine supplier initially targeting snack food production lines to become internationally recognised as a leader in packaging technology and solutions. Offering customers a complete processing/packaging production line, TSA can now not only include the design, delivery and installation of integrated packaging and processing equipment but also fully integrated operational elements such as power supply, voice and data cabling, wastewater management and building design. Page 2 of 9 With growing pressure to retain shelf-space and presence in the eyes of the consumer, processors are faced with numerous challenges when it comes to processing and packaging their products. With the availability of a true turn-key process/production line, project managers no longer have to ‘cherry-pick’ and coordinate multiple quotes from multiple suppliers. As a solutions provider, TSA claims its new division is not just a response to problems posed by customers. It also involves improvements to existing machinery and the company’s philosophy of ‘rethink the conventional’. The management of TSA considers that TSA’s defining benefit is one of practical ingenuity. By taking as standard the things that competitors treat as challenges TSA can accommodate the needs of clients and develop machinery to meet those demands. “With greater processing speed and higher quality we will have lower costs per bag and we will reduce maintenance costs,” said Ald Wood. Products TSA is a leading supplier of complete turnkey solutions to the food packaging and processing industry with the packaging and distribution systems, mabag® and maflo® being benchmark products in the industry. TSA products include: • product transfer & distribution • multiplatform scales • coders • metal detectors • case packers • case erectors • shrink wrappers • seasoning systems • complete processing equipment The company sources most of the parts for its machines from overseas. Japan provides most of the parts in dollar terms, with the UK the second largest supplier. The Uruguay Round of the General Agreement on Tariffs and Trade (now WTO) was particularly beneficial to TSA. In particular, the agreement extended the life of patents from 16 to 20 years. TSA has approximately 30 patents overall, but this extends to several hundred patents in the patent family worldwide. The organisation In Australia, TSA runs offices in Sydney and Melbourne. The company’s products are manufactured and distributed from its Melbourne office. Sydney is its corporate support office, which houses all of the administrative functions required to run the global business. Research and development (R&D) is carried out in Melbourne, as is marketing, corporate finance and human resources management. This structure ensures that the international offices run as smoothly as possible with the majority of control exercised in Melbourne and Sydney. Of the functions carried out in Australia, R&D remains a key function of the corporate support office. The majority of staff involved in R&D are employed in Melbourne, although there Page 3 of 9 are one or two R&D staff in the US and UK The R&D team receives feedback from TSA’s overseas sales, particularly regarding opportunities that have arisen in overseas markets such as the Middle East, China or the US, and is then able to incorporate this into the product design. Current locations: Americas: Minnesota, Oregon, Mexico, Argentina Europe: Glasgow, Prague, Venice, Paris, Madride Indian-Pacific: Australia New Zealand, Philippines, South Africa. Agents: South America, Indonesia, Germany, Russia, Thailand, Korea, Greece, Israel. The company has approximately 300 staff. Going international TSA realised early that as Australia had a population of only 25 million there was a limited domestic snack food market and therefore that they would need to look overseas for expansion. The company therefore approached Austrade for assistance and was provided with a small development grant which enabled them to set up TSA Europe. In 1991 Wood established a small office in the UK and spent the next six years in the UK trying to ensure that the European operation would be successful. The UK office was involved in sales, support, logistics and administration, a model that TSA has continued to follow as it expands globally. The company’s reason for choosing Europe as its first overseas expansion was that the technical specifications of TSA’s products were more suited to this region than to others. In particular the British market offered the fewest hurdles for TSA. It was similar to Australia in terms of organisational culture and consumer preferences for snack foods. Also since Taylor originally came from Scotland he understood the UK environment. Continental Europe presented more challenges for TSA, but the company went on to launch successfully in Spain, Germany and the Netherlands. TSA’s expansion into the US in 1995 was much more difficult, owing to the lack of technical compatibility between TSA’s system and those prevailing in the US snack food packaging industry. Additionally, Ald Wood found the US staff at the time far less industrious and committed than workers elsewhere. The terrorist attacks of 11th September 2001 also caused a dramatic reduction in the supply of financial capital. Furthermore, TSA had made a change of management that proved disastrous for the organisation. In the space of twelve months the company’s total sales in the US dropped from $US 18 million to $US 6 million. Fortunately for TSA the US market started to pick up some 12 to 18 months after the terrorist attacks and prompted by its difficulties in the US TSA extended south to establish operations in Mexico, setting up an office in 2001. In the same year, the company also established offices in South Africa and China. Competition Ald Wood believes that having a strategic mindset has been a key factor in TSA’s ability to move into the world marketplace. In the packaging industry, there are around 20 competitors worldwide, and the industry has a total size of around $1 billion. This makes it a relatively small industry, says Wood. What TSA sought Page 4 of 9 to do was to gain an advantage over its competitors by employing strategies that were suited to its industry’s particular environment. Importantly, the company analysed all of its competitors and determined that the competition collectively suffered from a lack of vision and an overestimation of its geographic limitations. This gave TSA the confidence to pursue a grand vision that would give the company a decisive edge over its competitors. In particular, TSA realised that