Introduction
This research paper undertakes a strategic analysis of the Brunswick Corporation, which is a manufacturing company based in the United States of America. The firm does not strictly operate in a single industry as it manufactures extensive product types in marine, fitness, billiards, as well as bowling industries.
Brunswick is organized into major divisions that represent the numerous products that it manufactures. The division heads report to the company’s chief executive officer. An extensive distribution network supports the marketing activities, with each global region being served by specific dealers and distributor agents. The company was founded in 1845 by John Brunswick when he formed the Cincinnati Carriage Making Company.
The company expanded in its operations to include cabinet, table, and chair making (Brunswick par. 1). In 1903, the company acquired and operated quarries together with an expansive land with trees to serve as a source of its raw material needs. The first international sales offices were established in 1912 in Mexico City, Paris, and Honolulu, among other locations.
The year 1925 also served as a milestone for the company as it was listed on the New York Stock Exchange for the first time. Today, the company has grown into a renowned boat manufacturer, with strong market sales across the world. However, the company presently faces strong market challenges in the areas of endowing its pension fund as most of employees are dissatisfied. Brunswick is a notable company owing to its consolidated kind of business that traverses across numerous industries and the global market.
SWOT Analysis
Strengths
Extensive Distribution Network
Brunswick has established a highly extensive network for the distribution of its products. In particular, the firm uses dealers, distributors, and retailers to aid in the sale of most of its boats. Equally, a considerable number of marine engines, billiards, bowling, and fitness products are also sold using the same network. Brunswick business segments are serviced by over 16,000 dealers on the international scene (Brunswick Corporation SWOT Analysis 4). This highlights how extensive and strong the company’s distribution network is.
Another extensive global network comprising of close to 2,850 dealers together with distributors are in charge of selling the Boat Group manufactured goods (Brunswick Corporation SWOT Analysis 4). Brunswick also owns the Land ‘N’ Sea brand, as well as the Kellogg Marine Supply, among other numerous marine products. These primary distribution platforms are the industry’s leading, especially in the USA and Canada (Brunswick Corporation SWOT Analysis 4).
Improving Financial Performance
Brunswick Corporation has continued to post positive market revenues and profits even in the face of the global financial crisis that slowed down the global economy performance. For instance, the compounded annual growth rate (CAGR) registered by the company stood at 6% during the period between 2010 and 2012. Revenues of the company also increased by 1.3% during the 2012 financial year as a result of the strong growth registered in the overall outboard engine and boat sales in the US (Brunswick Corporation SWOT Analysis 4).
The operating profit improved in the 2012 financial year to $264.1 million from $62.9 million only registered in 2010. A 23.6 percentage increase in the operating profit was also recorded in the 2012 financial year compared to the previous year’s profit. The increase was occasioned by improved operating earnings.
Brunswick had, during this period, improved its operating efficiency where sales volumes were also increased in selected segments (Brunswick Corporation SWOT Analysis 5). This overall improved financial performance is likely to raise investor confidence, thereby providing financial flexibility for purposes of expanding its operations.
Weaknesses
Poorly funded Pension Benefit
Brunswick operates a pension plan that covers some of its unionized employees. In the 2012 financial year, the pension benefit responsibility stood at $1,388 million, with planned assets fair value at $898.6 million. This resulted in a deficit $489.4 million. Similarly, the funded pension benefit position had a deficit of $523.6 million in the 2011 financial year. The underfunded pension plans are likely to force Brunswick to make contributions towards the fund later to achieve parity as far as the funding levels required are concerned (Brunswick Corporation SWOT Analysis 5).
Another weakness in the company is in its rising pension expense, particularly in the recent years. Brunswick has different contribution plans, including postretirement benefit plans that cover its entire workforce to a larger extent. Defined contribution plans’ expenses, for instance, stood at $34.2 million, $30.9 million, as well as $25 million for the 2012, 2011, as well as 2010 financial years respectively (Brunswick Corporation SWOT Analysis 5).
In general, the poorly funded pension plans, coupled with the growing pension expense, may end up restricting available funds as far as Brunswick’s working capital along with the capital expenditures are involved.
Opportunities
An Improving Fitness Equipment Industry
It is expected that the global fitness industry will register growth in the coming years. There is growing need among people from all the social and demographic categories to improve their health using exercises. It is estimated that a significant $75.7 billion is generated annually in the health club industry throughout the world. The Asia-Pacific and Americas markets are set to register positive performances in the coming years. In 2012, the health club industry in the US alone equaled $21.8 billion (Brunswick Corporation SWOT Analysis 6).
Latin America has health clubs that exceed the 45,000 mark spread across 15 markets. These present a significant growth potential. Strong growth rates have equally been registered within the Asia-Pacific fitness industry (Brunswick Corporation SWOT Analysis 6). The changing lifestyle trends are pushing growth in the industry in which Brunswick is a major player.
Positive Stance of the Recreational Boating Market in USA
The recreational boating market, especially in the USA, is projected to grow in the coming years. In 2012, the retail sales of sailboats and new power increased in the US by over 10.5% to 163,245. New powerboat sales have equally remained consistent in 2013, with the expectations put at 5% growth overly.
The recreational boating participation saw 37.8% of US adults participating at least for the first time in 2012. This marked a 6% increase compared to the 2011 figures. The growing recreational boating market provides Brunswick with a great growth potential.
Threats
Credit and Business Threat
Brunswick’s extensive dealer network of more than 16,000 globally has a significant number, among them who are comparatively small. Such dealers, in essence, require financial assistance to enable them offer stability for the company’s products. The company allows the dealers to take loans or other financial commitments that would help the dealer operate smoothly. Brunswick is in agreement with financiers to help its customers get money to purchase its commodities.
Brunswick may be forced to repurchase its manufactured products, or be forced to consider other options. This is the case in instances when the dealers fail to pay or meet their debt obligations (Brunswick Corporation SWOT Analysis 6). The risk faced by Brunswick in such arrangements is cushioned by reselling the repurchased products to other dealers. A dealer who terminates the contract they have with Brunswick implies that the Brunswick goes at a loss. Restricted market coverage means that the sales that are made are also reduced.
US Dollar Fluctuations
It is significant to point out that the firm’s revenues do not necessarily depend on the US market alone because Brunswick operates in the global market. Transactions entered into by the firm outside the US market are often traded in local currencies. However, this is risky for the firm because the fluctuating dollar value against other foreign currencies could affect its overall revenue base in the long run. A strong US dollar, for instance, lowers the company’s revenues, while a weakened dollar increases the revenue amount.
Weaker Economy in Europe
The global financial crisis has affected most of Europe’s economies adversely. Estimates indicate that the euro area economy grew in 2011 by 1.5%, but declined in 2012 by 0.6%. In 2013, a further 0.6% decline is anticipated with the European market facing high unemployment rate.
The European Union economy expanded in 2011 by 1.7%, but declined in 2012 by 0.2% with a further 0.1% decline expected to occur in 2013. The declining economy in Europe portends a poor market for Brunswick at least in the near future (Brunswick Corporation SWOT Analysis 7).
Industry Trends
Social
As a global firm, Brunswick deals with individuals from different cultural backgrounds. This potentially affects its business operations. The company recruits dealers, for instance, to help in marketing its products in various parts of the world.
However, these dealers may not necessarily perform their duties to the expectation of Brunswick because of numerous cultural and social aspects, including language, social beliefs, and religion (Venkatraman 4). Such instances may force the company to accept and operate with the situation at hand as it may not change people’s basic social construct to align perfectly with its expectations.
Economic
The globalization phenomenon has since occasioned a global economy where economic effects occurring in one region of the globe affect the entire world economy. The global financial crisis, for instance, began in the USA in 2008 and spread to other parts of the world.
The European market is still struggling from the aftermath of the economic contraction. This affects the general market potential for Brunswick. With Brunswick being a global company with focus on the global market, the firm is at a risk of suffering similar economic situations, both in the present and in the future.
Political
The global politics play a significant role in determining purchase decisions made by different countries (Venkatraman 4). The USA, where Brunswick Corporation is based, is among the most powerful nations that influence global politics in the world. The country has strong global interests which it guards using its immense influence and power.
However, the US also faces stiff opposition of its global politics and policy from other countries. Such politics affect the business performance of companies like Brunswick that originate from the US. International markets opposing the American policy and general political stand are likely to shun products and companies originating from the country, which would end up denying Brunswick substantial revenue sources.
Technological
Great technological advancements have been experienced in the recent years, with innovations in ICT playing a major role. Manufacturing companies, such as Brunswick, have integrated these technologies in their operations to enhance their performance. Improved technology helps companies to maintain lean operations, which lowers their operation costs and enhances their competitive edge.
However, high-paced technological advancements have also resulted in the short lived technologies and innovation that make it difficult for manufacturers to attain maximum benefits out of them. The duration spent in undertaking research and development activities and the costs involved require a significant period to recoup the benefits fully (Venkatraman 4)
Ecological
Firms all over the world are increasingly being required to take care of their environmental surroundings. Environmental management has grown in prominence, with some buyers making their purchase decisions after analyzing the environmental management practices of the firms. However, environmental management requires firms to spend a significant portion of their revenues to control the environmental effects of their activities.
In essence, the additional cost reduces the company’s overall profit and forces prices to be adjusted upwards to cater for the expenses in some instances (Venkatraman 4). Management of the environment is also a demanding task that requires the firms to put a lot of focus and concentration on the activities. Such divided attention in management puts companies, such as Brunswick, at the risk of losing focus of their main agenda, resulting in losses.
Five-Force Analysis of the Industry
Suppliers’ Bargaining Power
The suppliers have a high bargaining power. Brunswick’s operations rely on supplier relationships to maintain efficiency in operations. It is difficult for the industry players to achieve their anticipated profitability without suppliers working closely with the manufacturers.
The strong supplier power is further enhanced by their ability to amalgamate into the industry. Supplier firms can potentially venture into direct manufacturing using their established operations and significant supply base. This would render the traditional manufacturers, such as Brunswick, irrelevant (Venkatraman 4).
Customer Bargaining Power
Buyers in this industry have a high bargaining power. Sales are reliant on the macro-economic factors, such as the global financial crisis. In essence, firms such as Brunswick are forced to loan their buyers to sell their manufactured products (Venkatraman 4). Buyers in this industry are predominantly price sensitive owing to the fact that the acquisition of luxury products is done through discretionary spending.
It is crucial to point out that the dealerships enjoy a powerful say when it comes to pricing issues, given that Brunswick depends on its dealership networks to reach the market. The dealers control a significant portion of the end consumer market. Additionally, the high buyer bargaining power emanates from the fact that Brunswick mainly manufactures standard products that may fail to meet the individual needs of customers.
New Entrants Threat
The threat of entry into the industry by new players is moderate. A relatively large capital base is required by any new player wishing to operate in the industries involved, which is not an easy achievement. However, the industry has a low switching cost and significantly lacks customer loyalty.
Substitution Threat
The threat of substitution is high. There lacks a unique and specialized niche within the industry segment that Brunswick operates. This provides room for buyers to start considering other substitute products. The high threat of substitutions is further highlighted by the low research and development expenditure incurred by Brunswick in 2011, which was 2.66% of the overall sales. It points at the company’s failure to innovate adequately to achieve a competitive edge.
The value chain for the numerous products manufactured by Brunswick is overextended. This fails to achieve a distinct product differentiation. In the long run, this results in diminished brand equity, thus opening the room for buyers to consider buying alternative products (Venkatraman 4).
Competitive Rivalry
The extent of competition amongst the existing industry rivals is high. The companies are seeking to establish themselves as the industry leaders, thus they are in the process of undertaking various competitive measures (Venkatraman 4).
Business Level Strategy
Generic Strategy
Brunswick is mainly a cost leader. Brunswick has remained as a cost leader by providing goods that are of recognized quality in large quantities. There is a limited personalization of products. It is significant to note that the company spends very little portion of its revenue to fund its research and development activities.
Equally, Brunswick has established an associated distribution strategy to achieve an extensive marketing networking such that it may increase its sales volumes (Daft 245). The company builds its significant competitive edge by increasing its sales volume through such extended distributor networks.
Overly, the industry in which Brunswick operates includes several strategic groups. The existing strategic groups include the total segments served, the distribution channels used, as well as the degree of geographic coverage. Brunswick, however, does not follow a special strategy that is based on the life cycle of the industry.
Strategy plays a critical role in shaping the firm’s objectives. In seeking to achieve cost leadership, the company is targeting to maintain its operation cost as low as possible. This requires the manufacturing activities to be maintained in a lean manner to drive down costs. Achieving lean manufacturing requires the use of technology to enhance speed in production and better quality.
Corporate Strategy
Brunswick’s operations in the recent years have not entailed the use of mergers and acquisitions as a strategy for operations. On the other hand, the company has adopted and embraced a diversification strategy that has resulted in different businesses in various industries. The diversification strategy is largely unrelated as the segment industries have no association with one another other (Daft 245).
Brunswick pursues a horizontal integration strategy for its business operations. It has managed to absorb its various industry performances, including billiards, marine engines, bowling, and fitness to form a single firm. However, it does not support vertical integration of its operations as all its production processes are performed by the same company.
Brunswick participates in the environmental management of its operations and activities. The firm follows an elaborate environmental management plan that addresses waste management, monitoring and protecting water quality, preventing the escape of potential contaminants of its well bore, and addressing the potential concerns that relate to geophysical testing (New Nouveau Brunswick Canada 8).
Additionally, Brunswick’s environmental management program extends to address air emissions, such as greenhouse gases and plans for public safety and related emergency issues.
Brunswick also addresses ethical issues that are involved in its various business activities. The firm has established an ethics program that it seeks to implement in the entire organization (Brunswick Corporation par. 1). Workers at the company are expected to observe stipulated ethical guidelines, while a further code of ethics exists specifically for the senior financial personnel and managers.
Strategic Recommendations
Brunswick should seek to enhance its innovation levels significantly if the firm seeks to remain in business for a longer duration. The current budget set aside for research and development activities is not adequate to achieve the necessary competitive edge for the firm.
In essence, more funding should be channeled towards improving its innovation capabilities. The firm may fail to adapt to the new environment with its low R&D funding as leisure and recreational behaviors face a major shift across the world and with the great advancement in technology.
Conclusion
Brunswick has expanded its operation to span across several industries. The company’s strengths include a widespread distribution and agent network that enables it to reach all global markets. Brunswick has also registered strong financial performance in the years. This has seen the company improve its revenue and profit base. Brunswick’s fitness products will face a positive market stance in the near future in the face of people changing their lifestyles and, instead, opting to do exercises.
However, the firm suffers from poor funding of its pension fund, which has consequently led to loss of motivation among its workforce. The firm pursues a cost leadership strategy with a view of maintaining its operating costs as low as possible. The extensive distribution network is Brunswick’s greatest market competitive advantage because it ensures that the company increases sales opportunities, which in turn implies significant market revenues and profits.
Works Cited
“Brunswick Corporation SWOT Analysis.” Brunswick Corporation SWOT Analysis: 1-7. Business Source Premier. Web.
“Brunswick Corporation”. Web.
Daft, Richard. New Era of Management. Mason, OH: Cengage Thompson Higher Education. Print.
New Nouveau Brunswick Canada. Responsible Environmental Management of Oil and Natural Gas Activities in New Brunswick: Rules for Industry. Web.
Venkatraman, Maya. Brunswick Corporation (BC) Memo. Web.