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Developing The British Extraction Technology Market - Strategic Analysis and Concept for ESTA

Diploma Thesis 2003 65 Pages

Economics - International Economic Relations

Excerpt

Contents

1 Introduction
1.1 Problem Definition
1.2 Objective
1.3 Methodical Approach
1.4 Definitions & Explanations

2 Theoretical Framework
2.1 Basics
2.2 Fundamental Elements
2.3 Integrated Strategic Planning - An Illustration

3 The Market Development Process
3.1 Targets
3.2 The British Market - Macro Surroundings
3.2.1 Market Characteristics
3.2.2 Politics
3.2.3 Regulations & Standards
3.2.4 Industry
3.3 The Extraction Technology Branch - Micro Surroundings
3.3.1 Market Size & Demand
3.3.2 Authorities Affecting Demand
3.3.3 Competitive Surroundings
3.3.4 Existing Distribution Standards
3.4 ESTA - A Characterisation
3.4.1 Company Profile
3.4.2 Products
3.4.3 Current Activities within the UK Market
3.5 SWOT Profile - An Interim Conclusion
3.6 Strategy Selection - Theory and Classification
3.6.1 Corporate Level
3.6.2 Business Unit Level
3.6.2.1 Generic Business Strategies
3.6.2.2 ESTA’s Business Strategy - Domestic and Abroad
3.6.3 Functional Level
3.6.3.1 Basic Marketing Strategy
3.6.3.2 The Marketing Strategy Path For ESTA
3.7 Marketing Planning - Basic Considerations for Implementation
3.7.1 Identifying Market Segments and Target Customers
3.7.2 Formulating a Product Strategy
3.7.3 Setting A Price Range
3.7.4 Establishing Distribution
3.7.4.1 Finding & Selecting Potential Sales Partners
3.7.4.2 Establishing a Relationship
3.7.5 Promoting the Development
3.7.6 Short - Term Schedule & Budget Estimation

4 Conclusion

Figures

Figure 1: UK Indicators

Figure 2: The Integrated Planning Process

Figure 3: UK Economic Indicators

Figure 4: GDP Growth Rate 1999 - 2004

Figure 5: UK’s major trade partners 2002

Figure 6: Sales by Product Type 2002

Figure 7: Export Products

Figure 8: SWOT - Profile

Figure 9: Options for a Basic Marketing Strategy

Abbreviations

illustration not visible in this excerpt

1 Introduction

The globalization of today’s market place has been subject to great attention. Whether or not a company participates directly in international business, hardly anyone can claim not to be involved in any way in the global market place. In fact, due to saturation tendencies in the domestic market, the dependency on international customers as well as the ever increasing pace of global competition, nearly all companies of any size and business level are faced with the impacts of the world market.1 Their performance, however, differs significantly. Especially for SMEs foreign expansion is the main challenge; minor foreign market knowledge, inexperienced staff and the dependency on day-to-day operations limit the possibilities for a systematic approach to foreign markets.2

In the literature of international marketing and management there is a variety of theoretical approaches concerning the process of internationalisation respectively the entry into foreign markets as well as market development. However, in many cases especially Small and Medium Sized Enterprises (SMEs) fail to interpret the theoretical approaches according to their needs and thus are confronted with a considerable gap between theory and their business reality.3

Being employed in a SME myself missing strategic planning and emotional decision-making has indeed been a part of my work experience during my co- operative studies. In my company I am now responsible as Area Sales Manager for the Scandinavian region, Austria and the United Kingdom and it will be my task to correlate the indications of theory with the necessities of the specific internal reality of my job assignment. As the company has started to re-organise export activities, the development of the British extraction technology market is a given task and at the same time the subject of my dissertation.

1.1 Problem Definition

“ Due to the increasing competition the long-term continuity of companies depends on a conceptual approach on international markets. It can not be the aim to be involved in as many international markets as possible without any strategic basis. Furthermore, it is not enough to trust on coincidence in searching for international partners or the general international opportunity. Instead, there has to be a clear target and reasonable steps to reach it. ” 4

In general, the previous statement summarises ESTA’s current struggle. The company has managed to export to several countries in the world either directly or by means of independent distributors generally based on random contacts. Initially, this supported the persistent growth of the company and contributed well to its reputation. However, as the competitive structure in the domestic market has increased and sales are threatened the company’s objective is now focused on the international market in order to ensure the ongoing success and growth of the company.

For this reason it has been recognised that random export involvement with no strategic basis is not appropriate for the common goal. Therefore potential markets have been selected for a more focused market development. Among those, building up of the British market is the current priority.

1.2 Objective

The objective of this dissertation is to provide a systematic hands-on approach within market development for ESTA in the British extraction technology market. Relating to major elements of a strategic planning process the emphasis is on investigating external surroundings of the foreign market and correlate them with the internal circumstances of the company. Based on a derivative of a basic market strategy suitable considerations for marketing planning are to be introduced. In particular, this should then relate to how to establish a real presence in the market and outline the basics necessary for this venture.

1.3 Methodical Approach

This dissertation is divided into four chapters. The first chapter refers to introducing the subject and contains problem formulation, purpose and the corresponding approach as well as essential definitions.

The second chapter focuses on the theoretical framework serving as the basis for the following working process. It reveals major aspects of a strategic planning process and results in an integrated illustration that communicates the interdependency of the individual levels that are referred to in the following main chapter.

Therefore, chapter three is the main focus of this dissertation. It defines the general targets of the market development process (section 3.1) and subsequently analyses external macro and micro surroundings (section 3.2 and 3.3) of the foreign market and characterises the company ESTA (section 3.4). Consequently, the dimensions of external and internal surroundings in accordance to the company circumstances result in a SWOT-Profile (section 3.5). This allows the consideration of a basic market strategy (section 3.6) and derives an actual suggestion on suitable marketing planning for the market development task.

The fourth and last chapter concludes the previous considerations and briefly provides a further perspective.

1.4 Definitions & Explanations

This chapter provides the necessary definitions and explanations of the major terms used in the following pages to ensure a comprehensive understanding. This will be complemented by explanations in the individual sections.

Market Development >>

According to the Ansoff-Matrix that is based on a combination of products and markets the term market development in general refers to selling existing products to new markets.5

For the purpose of this dissertation market development also aims at attracting an increasing number of customers in a new foreign market in order to generate cross-border profits based on an existing product line.

United Kingdom >>

The term "Britain" or “British” is used informally to mean the United Kingdom (UK) of Great Britain and Northern Ireland. The United Kingdom is made up of England, Scotland, Wales and Northern Ireland. Its full name is the United Kingdom of Great Britain and Northern Ireland. Great Britain is the name given to England, Scotland and Wales. It is the largest island of the British Isles. Northern Ireland and the Irish Republic form the second largest. The Isle of Man and the Channel Islands are not part of the United Kingdom. They have their own legislative assemblies and systems of law. However, the British Government is responsible for their defence and international relations.6 Previous to a detailed evaluation of the market in chapter 3 Figure 1 provides a general overview.

Figure 1: UK Indicators

illustration not visible in this excerpt

Source: Own illustration cp. Empirica Delasasse (2002:253-254)

Extraction Technology >>

For the purpose of this dissertation extraction technology refers to plant and machinery designed to remove dust and fumes from industrial air, polluted during the manufacturing process. The most common extraction devices are as follows7:

Filters, which block or impede the movement of particulates, most commonly by fabric filters using the simple concept of passing air streams through a tightly woven fabric bag or cartridge to sieve out any particles contained within the air. Filters are the most common form of extraction and are divided into dust filters for e.g. metal or plastics processing and fume filters for welding and soldering applications.

Cyclones, use centrifugal force to separate particles from gas streams.

Wet Separators, operate by collecting particles in liquid droplets. In a whirlchamber partially filled with water the flue gases accelerate through a converging section. The air and the water are set in motion and the dust is bound to the water as sludge.

ESTA >>

The name of the company refers to its initial product range:

- Elektro - Staub - Absauggeräte (Electric-Dust-Extractors) -

Founded in 1971, the ESTA GmbH & Co. KG is a SME with the business task for developing, designing, manufacturing and selling technical devices to improve work safety and the environment by dust and fume extraction. ESTA is a family business situated in Senden near Ulm. The company takes up an area of about 10,000 m² including administration and manufacturing buildings and employs more than 100 people. In addition to its core business extraction technology the company has a second minor business unit: Swimming Pool Technology8. Yet, this paper focuses exclusively on ESTA’s core business: Extraction Technology.

Strategic Analysis & Concept >>

Strategic Analysis is an element of strategic planning and deals with investigating market and company surroundings in order to derive suitable concepts in terms of business actions.9

2 Theoretical Framework

2.1 Basics

The development of a specific country market requires a well-defined strategic approach in order to cope with the complexity of the given task. In the literature of international marketing and management this strategic approach has received great attention and is most commonly referred to as the “strategic planning process”10. Being relatively new the strategic planning process was first introduced in the early 1970’s in the strategic management education of the Harvard Business School. Ever since, this model has been subject to modification and various authors have made their contributions to the initial thought. However, the common sense in regarding this subject is that strategic planning refers to an information based process that matches external demands with internal potentials in order to ensure ongoing business success. It provides the framework for a disciplined and step by step effort aimed at improving the overall capabilities of the firm to operate in an intensive and dynamic competitive environment.11

The strategic planning process is characterised by the following major terms12:

- Strategy
- External demands
- Potential of the firm
- Long-term success
- Information based process
- Matching external surroundings with the firm

The term strategy initially refers to a series of interdependent single actions towards a certain goal. In most business matters this goal is to ensure the ongoing success of the firm.

When external demands are concerned one considers the fact that every firm is surrounded by a specific environment divided into macro (country perspective) and micro (specific branch perspective) aspects in which it relates to. This economic environment equally includes opportunities and threats.

The potential of the firm are specific capabilities respectively strengths and weaknesses enabling or hampering the company to compete against other members of the market. In doing so, the firm aims to ensure ongoing success for its business on a long-term basis.

The term information based process relates to the necessity of scanning opportunities and the threats of the economic market surroundings. Consequently, the gained knowledge has to be transferred by matching external surroundings with the firm.

2.2 Fundamental Elements

As strategic planning evolves in complex processes several stages are to be defined in order to establish a step by step approach13:

- Setting Targets
- External Scanning
- Company Analysis
- SWOT-Profile
- Strategy Selection
- Implementation

For the purpose of this paper, setting targets refers to formulating the actual aim of developing the British extraction technology market.

The external scanning is based on a macro and micro perspective and provides a first overview (macro) - of the market in general, politics, regulation and standard, as well as industry attractiveness.

In the micro perspective the external scan refers more specifically to the branch; to market potential, the influence of authorities as well as competition and distribution.

Macro and micro analysis will then enable a brief evaluation of opportunities and potential threats.

The company analysis deals with the company’s specific assets such as product portfolio, management & structure, experience & knowledge as well as general resources and activities.

This reveals strengths and weaknesses. The identification of opportunities and threats within the market in relation to the strengths and weaknesses of the company result in a SWOT-Profile.

The Strategy Selection focuses on the main aspects of market specific strategies in relation to the indications of the SWOT-Profile in order to set the path for suitable operative planning and implementation .

2.3 Integrated Strategic Planning - An Illustration

In order to provide an integrated graphic orientation the previous information is combined into a layout (Figure 2) that functions as an illustration for the necessary steps of the market development process and their interdependency.

Figure 2: The Integrated Planning Process

illustration not visible in this excerpt

Source: Own illustration cp. Hax, Majluf (1996:48)

3 The Market Development Process

According to the strategic planning process of the previous chapter the following market development process will closely relate to the given indications and most importantly to figure 2. The major elements are considered and are correlated to the company and country specific tasks in terms of developing the British extraction technology market for ESTA. Thus, in combination with the theoretical framework this chapter is set to be the main focus of this dissertation.

3.1 Targets

In order to concentrate on the main focus during the development process the following targets are given:

- Expansion of the product portfolio into the UK market as essential part of the general focus on export activities

- Gaining specific market knowledge
- Increasing sales volume & market share of ESTA products
- Expenditures to be paid by short-term profit
- Increasing the name recognition of ESTA in the UK
- Establishing sophisticated distribution networks based on co-operation with local distributors

In the following sections the main targets will be formulated more precisely according to the progress of the development process. In the beginning, the following two sections provide the statistical and informative background necessary to take a deeper look at market surroundings in the UK.

3.2 The British Market - Macro Surroundings

Previous to a narrowed approach to the micro surroundings of the specific extraction technology market in section 3.3 an overview about the British market in total is provided, corresponding with the need to gain general market knowledge.14

3.2.1 Market Characteristics

Over the past two decades Great Britain has realised tremendous structural modifications in privatising government owned enterprises. Furthermore, economic surroundings are regarded as the most liberal in the EU region. In fact, the UK market significantly attracts foreign attention for export or direct investment. This popularity is based on a simple idea: A deregulated and flexible economy, low labour costs, tightly controlled inflation accompanied by a decent growth as well as low business and personal taxes.15

The largest proportion of the country’s GDP accounts for the service sector including, trade & merchandising with shares of approx. 70 %. In contrast, the manufacturing industry contributes about 19 %. Due to this imbalance, the UK market is often referred to as consisting of a “two tier economy”. As the service sector especially driven by IT and London as the global financial centre continuous to struggle as a result of the fall in the stock market, industry has been given a new opportunity within the British economy. Plus, the strong commitment to the European market has established the UK among the leading industrial nations of the world. A vibrant market with few restrictions and many different opportunities16.

Figure 3: UK Economic Indicators

illustration not visible in this excerpt

Source: Own illustration cp. bfai (2003)

Market Outlook >>

As indicated in Figure 4 the British economy will continue to grow in 2004 well above the EU average.17 This is mainly due to growing investments within the industry sector. Despite the weak Pound which has fallen by about 10 % as it is compared to the EUR in 2002, Great Britain still offers a satisfying

Figure 4: GDP Growth Rate 1999 - 2004

illustration not visible in this excerpt

demand potential.18 Source: Own illustration cp. bfai (2003)

Overcoming the general uncertainty as a result of the weakened world economy the main focus is on 2004. As private consumption has passed its peak, the government is planning to increase public demand by about 25 % during this year to ensure ongoing growth. However, the development of the UK economy will largely depend on the exchange rate especially in terms of the EUR. Due to the large involvement in EU trade (Figure 5) the negative effects of the weak Pond raise the question on how long the UK can manage not to be part of the European Monetary Union?

The British - German Economic Relationship >>

German companies, in particular, have discovered the potential of the UK market. In the German export ranking the UK is the third most important economic partner. As German direct investments are concerned, it even comes second. The most important import/export goods in the German-British trade relationship are automobiles. In 2002 imports from Germany have increased significantly by 6,8 % and with a share of approx. 14 % (30,3 Billion GBP) of total imports removed the US from its former leading position (Figure 5).19

Figure 5: UK’s major trade partners 2002

illustration not visible in this excerpt

Source: Own illustration cp. bfai (2003:34)

3.2.2 Politics

The UK is a strong member of the European Union and shows a long-term political stability in its Labour government. Labour’s main objective is to secure sound public finances and in doing so, Labour does see a clear role for government as an active agent in a dynamic, open economy. In particular the government is seeking to raise the growth potential of the economy through policies directed at raising education and training standards as well as enhancing environmental legislation20. As a EU member the UK’s political stability has been assumed. More importantly in assessing the market for extraction technology, however, is the governments role in supporting environmental technology by stronger legislation21. As the previous information about the intensive trade relationship with Germany has indicated there are no obvious political or legislative burdens in trading with the UK.

3.2.3 Regulations & Standards

Accompanied with no obvious political or legislative burdens the UK shows no relevant prohibitive behaviour against industrial products such as extraction technology. In fact, there is no import discrimination of foreign products by means of industrial standards or regulations.

There is even a German TÜV which provides technical advise to British and German companies located in the UK.22 Due to EU legislation export administration is convenient. Except the VAT Identification Numbers on the invoices that regulate VAT among the trading countries there are no special assignments or documents (e.g. Pro - Forma Invoice, Export Declaration etc.) required. Most commonly German companies invoice in EUR.23

3.2.4 Industry

As mentioned in the market characteristics industry in general accounts for the second most largest proportion of the country’s GDP (19 %) behind service & merchandising. The most important industry sectors are the electronics industry, the paper industry with press, printing and paper manufacturing as well as the chemical industry. Increasing importance is seen in the automotive and aircraft industry dominated almost entirely by American, Japanese and German manufacturers. In addition, more important industry sectors are mechanical engineering and metalworking.24

Due to the object of this dissertation and the fact that extraction technology refers most commonly to industrial air pollution caused by dust and fumes in the following outlook the author will concentrate on industry sectors with typical production processes in the manufacturing industry, mechanical engineering and in some respects related to the construction industry.

Outlook >>

The British manufacturing industry has experienced a decline of 2,4 % in 2001 and even severely by 3,9 % in 2002. However, due to the current demand and high productivity it is expected to perform a two-digit rise in 2004, mainly supported by a strong automotive sector. As the booming year of 2002 (approx. 2.5 Mio cars manufactured) has passed the forecasts for 2003 and 2004 are less pessimistic. Due to the current situation for no reason. There is an increasing demand ( + 40 %) for company cars with a Diesel engines contributing to the stability of the car industry.25

[...]


1 cp. Niehoff, Reitz (2001:35 et sqq.)

2 cp. Perau R., Boving D. (2000:11)

3 cp. Holland (1997: 1 et sqq.)

4 cp. Holland (1997:5)

5 Johannsson (2003:262)

6 Empirica Delasasse (2002:253-254)

7 cp. MSI (2000:4 et sqq.)

8 cp. ESTA Management Hand Book (2002)

9 cp. Wöhe (2000:135)

10 cp. Hax, Majluf (1996:24)

11 cp. Bea, Haas (2001:49)

12 cp. Bea, Haas (2001:50-51)

13 cp. Bea, Haas (2001:52-54)

14 see section 1.4 for geographic and general UK indicators

15 cp. DTI (2000: 28 et sqq.)

16 cp. bfai (2000: 13 et sqq.)

17 EU Average 2003/2004: + 1,1 % cp. bfai (2003:5)

18 cp. bfai (2003:10 et sqq.)

19 cp. bfai (2003:34)

20 cp.MSI (2000:8-9)

21 There will be further information in section 3.3.2

22 cp. Kemper (2000:65 et sqq.)

23 cp. Kemper (2000:71)

24 cp. bfai (2003:15)

25 cp. bfai (2003:16-17)

Details

Pages
65
Year
2003
ISBN (eBook)
9783638490443
File size
1.3 MB
Language
English
Catalog Number
v53652
Institution / College
Heidenheim University of Cooperative Education
Grade
1,5
Tags
Developing British Extraction Technology Market Strategic Analysis Concept ESTA International Business Studies

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Title: Developing The British Extraction Technology Market - Strategic Analysis and Concept for ESTA