In modern changing business environment, companies need to have strategic policies to enable them remain competitive and profitable.
Globalization and international trade has opened massive opportunities that companies can venture into; when operating in the global scene, decisions and policies developed should be responsive to the needs of the particular business environment that the company aims at venturing.
Lennox International Inc. is an international American-based company, in the business of providing climate control products like refrigeration equipment, heating apparatus, air conditioning equipment, and ventilation; the company is listed in New York Stock Exchange.
The company has been in operation for more than one century and remains to be competitive and relevant amidst changing business environments and competition. This paper analyzes the strategic and financial situation of the company.
Organizational Overview
Dave Lennox established Lennox International Inc in the year 1895; where the company was making riveted steel furnace, nine years down the line the company has accumulated enough financial base that it established a single outlet to sell and fix the furnace to contractors.
In 1923, to cover for the expansion, the company developed a warehouse in Syracuse, New York; this time they developed new products in their production like forced-air furnace for residential heating apparatus.
Currently, the company has its headquarters at Richardson, Texas, near Dallas; it has trimmed its services and products into four main areas they are: refrigeration, residential heating and cooling, Service experts, commercial heating and cooling
Amidst competition and global financial crisis that befallen the world, the company continues to make some improved business gains; in 2009, the company recorded an annual sales of $2848 million but the figure went up in 2010 to reach $3096 millions.
Currently, the chief Executive officer is called Todd M. Bluedorn (please see Table 1 for a board of directors list)
Table 1. Directors List
Strategic Assessment
Strategic assessment is a management tool where a company analysis internal and external environment that it is operation it to be able to learn the strengths, opportunities, and hindrances that might hinder the company from attaining its corporate goals and objectives.
It is a decision-making tool where the company utilizes the available information, and blends the information with collected information through external environment analysis, and uses the quality to make decisions. The following is the strategic assessment of Lennox International Inc:
External Analysis
External analysis defines those factors that are beyond the control of a company; they are the factors that influence the operation of the company but there is nothing much that the company can do other than mitigate any threats and risks associated with them.
One of the most obvious problems that are facing Lennox International Inc. is global financial crisis, the company is not able to diversify fully its operations and processes since the world is having a slower economic growth.
To make the situation even worse, the crisis started in the United States where the company has its main operating base. Another issue facing the company is high competition from international and other domestic companies in the industry; they include Samsung and Philips company who have developed into the sector and coming with similar products.
With current moves by activists to improve the environmental condition in the efforts of making the world enjoy benefits of sustainable development, as such the company has to make some adjustments in its operations to produce commodities that are environmentally friendly as well as ensure that it has programs to protect the environment.
Such programs include recycling and water conservation programs; other than looking into such factors, the company has to comply with national and international environmental policies like the regulations of Kyoto Protocol.
Another external influence that the company is facing is the shift of business from Western and American markets to the Asian companies; many countries are diverting their trade to the Asian and Eastern countries making business in the United States more challenging.
Other than the shift, the terrorism situation in the country has made some traders to shy away from getting commodities from the place1.
Corporate Level Strategy
In the wake of global financial crisis, Lennox International Inc had to come up with corporate structures to remain marketable and relevant in modern contemporary business environments; one of the corporate strategies that the company has is to take advantage of its heritage of strong local autonomy.
Using the strategy, managers at different states were supposed to advice the company on the kind of products that the company should make to fit that class of people that the country has. This saw the company makes products of different sizes and concentrated in some blue ocean business approach.
For instance with the fiancé competition that it was facing in the Asian countries, the company decided to relax its expenditure in the country and instead concentrate on other areas like African and Caribbean countries which were economically growing and promising. It also concentrated in the local markets and used research and development policies to come up with consumer driven products.
In line with growing the number of customers, the company has customer-relationship management programs that aim at improving the loyalty of customers in the domestic and international arenas. Direct marketing is another approach that the company has embarked on to ensure that the market of its products grow further.
Business Strategy
To have a well-concentrated operation and facilitate the delivery of quality products and services, the company has divided its operations into four main business areas or line of business, refrigeration, residential heating and cooling.
Service experts, commercial heating and cooling, the move facilitate proper leadership in the business with the aim of developing the most effective strategies and policies relevant to the sector of division.
To ensure that it remains competitive, the company has a robust marketing and research development that has the task of reaching green markets and ensuring that it gets advantage from the markets. There are different tools that have been adopted to assist in the sales; they include direct marketing, the use of social networks, the use of posters, and electronic marketing tools.
The information and technology department is one of the strongest department in the company where it has the aim of advising the business on the best technology to adopt as well assisting the company come up with the right analysis tools for market information for decision making.
Decisions are the driving force in an organization; the quality of decision made by managers determines the competitiveness of the organization; Lennox International Inc adopts a scientific decision making approach.
The growth of an organization is influenced by the quality as well as acceptability of decisions made by managers of levels.
To come up with a good decision Lennox International Inc undergoes through three main stages, the stages are defining the problem, data collection and choosing the best alternative. Involvement of staffs in the decision making process contributes to acceptability of the decision2.
Financials
Despite the hard economic times, Lennox International Inc has shown some improved strength in its financial standing, the company has the capacity to meet its financial obligations when they fall due and have the capacity of diversifying business internationally.
Financial Assessment
Since 2006 to 2009, Lennox sales has been reducing, the figures as per the company’s audited financial statements were $2847millions, 3,441 million, $3,691 million, and 3,700 million, the figures are a show of a business that is having financial constrains.
However it should be remembered this was the time of global financial crisis where all companies especially those operating in the United States are facing; in 2010, the company shown an improvement of its sales when they increased to $3,096.40 million, this shows a company that have come up from the crisis and have strengthened its marketing and operation base.
Operating incomes for the periods were not any different with them reducing from 2006 to 2009 then increasing in 2010; the figures were as follows: $166.8m, $165.7m, $123.8m, $60.8m, and $117.1m, from 2006 to 2010 respectively.
Looking at the changes and probably trying to deduce what happened in 2010, it is evident that the sales budget, marketing, and distribution budget of the company increased. This shows that the company embarked on massive campaigns and marketing of its products.
The company in the last five years showed the capability and short-term financial strength where its capability to meet its short-term financial needs have been seen from the ration of its current assets and current liabilities.
Though the current ration hardly could reach the most recommended level of two in either year, at least the company had the short-term assets to cater for its liabilities; the following is the record of its current assets and current liabilities. Current assets.
In the recent years, that are 2009 and 2010, the company is seen to have an increased strength in the rate at which it can meet its financial obligations when they fall due.
In 2010, the company’s long-term financial obligation increased, this is when it recorded an increased amount of long-term loan of $317m from 2009 amount of $193m; the amount of loan can be seen as an additional capital that the company took to ensure that it has strengthened its operations in the global and local scenes.
Other than in 2010, the last five years had seen a reduction of long-term loan that the company has had.
The company has had a slowed growth in fixed assets value, the amounts seem to be in the same margins, and the amounts after depreciation were
The above trend does not show a health business, it shows a business that is struggling to keep a float and one that seems not to be inventing in fixed assets.
Although this can be an alarm call, it can also show a business that takes time to put its house in order and invents in assets when the situation it is operating under seems to improve.
Corporate Forecast
The company is listed in the New York Stock Exchange; it continues to be one of the strongest trading companies. As at 17 May 2011, the company’s stocks were selling at $47.8 while 52 weeks high and low were 54.1 and 39.4 respectively.
This shows a stock that is not stable and can be subject of speculations. For investors that are willing to make a fast kill with the stock exchange, they are some of the shares that can offer such an opportunity.
Despite the hard economic times facing the company, the company has continued to respect their shareholders, since 1999, the company has been having an increased dividend share. In 2010, the dividends for the last quarter were $0.180 per share this was $0.03 higher than the amount recorded in the same period in 2009.
The flow of the divided in the space that the company has been facing some financial difficulties is a show of a company that has high value for its shareholders. It is unique to see a company having reduced incomes from sales yet the divided that it is declaring are increasing with time.
Another move in the same line is the effort that the company opted for in 2010 of adding its loan budget instead of reducing the amount that it was to offer as dividends to shareholders, at normal situations, companies when having financial financing decisions to make, they opt for a reduction of their financial dividends declarations than to borrow finances.
When interpolating the two moves, the company seen to be a good company for long-term investments as it respects its shareholders, the current restructuring and recovery from financial crisis are also some indications of a business that in the future will offer higher returns to the shareholders.
The company also seems to have concentrated it powers in marketing and selling areas and with its vast experience and effective corporate management, the future seems bright with the company3.
Risk Analysis
When in operation, a business faces different risks from internal and external forces. The risks can be arranged or mitigated in the best way possible to ensure that the company remains competitive amidst the changes in world trade environments. The following are the major risks affecting the company and the way it has done to mitigate losses as a result:
Exchange Risk
Since the company operates in the global scenes, there are high chances that when the foreign exchange market is not healthy, the company can suffer some losses and when the markets are performing well, some gains accrue to the company. global financial flows, recent global financial crisis and recession have lead to exchange rate depreciation and interest rate hikes; the new changes has resulted to international foreign currency environment that can be characterized with unsound fundamentals; exchange rate inflexibility.
Since the foreign market is unpredictable, the company has made contingency plans to ensure that sudden and abrupt change or fall in the foreign exchange market does not force the company into financial constraints.
Country Risk
Lennox International Inc operates in the global scenes, the country that it operates in determines the success of the company at that particular country as well as the general good of the company; this factor makes the company venerable for political, social and domestic rivalries of the countries it is operating in.
For instance, there is a high risk in countries that have shifted their trade to the Asian countries. In time of election in those countries will no stable political structures; the company has in the past suffered losses.
To ensure that the company remains competitive and mitigates this risk, there are occasional countries of operation audits that help to improve the business practice with the company. It also respects the country of operation laws, politics, culture, and tradition.
Financial Risk
In contemporary business environments, businesses are faced with financial risks; financial risks means that the company is faced with the challenge of developing the best approach that it can venture into the market and sell its products at a price afforded by the target market as it makes a financial gain from such a transaction.
When trading in the global scenes, the company faces the challenge of whether it will sell its products directly to the consumers, which will probably earn the company higher financial gains or it, will have to involve the services of intermediaries and franchise its businesses.
The best practice for the company is one that offers high value for money and one that ensures that things are on course.
To ensure that the company militates against financial losses, the management has embarked on strategic business management policies and tools; they are policies that allow the business to operate at its optimal by improving the internal process, services and products.
The programs have two main agendas, to reduce the cost of operation as it increases the sales of the company.
Market Risk
In the globalized business environments, business are facing a challenge dominating large share of the markets that they operate; Lennox International Inc is faced with domestic, multinational and international companies, there is also a blatant duplication of their products by some local competitors.
The shift to Asian market is another risk that the company is facing since it has to compete with companies that seem to have an upper hand from the first instance.
To ensure that the company remains competitive and mitigates any markets risk, the company has embarked on two main issues, massive innovation, invention, research, and development. It ensures that it makes products that are responsive to the needs of the communities it serves4.
Conclusion
Lennox International Inc has been in operation for more than a century; however, the company has faced numerous challenges in the last five years that has made it have a slowed expansion and growth.
The main challenges come from competition, global financial crisis, and general trend of consumers moving to the Asian markets.
Despite the challenges, the management has embarked on numerous strategic moves to remain competitive; the strategies adopted by the company include total quality management (TQM), six sigma, integrated supply chain management, and diversity management.
The above policies have seen the company sales and productivity improve in 2010 although it is too early to judge whether the policies are lasting solutions to the company’s problems.
Bibliography
- Lennox International Inc. Official Website. Lennox International.
- Zahra, Shaker A., R. Duane Ireland, and Michael A. Hitt. 2000. “International Expansion by New Venture Firms: International Diversity, Mode of Market Entry, Technological Learning, and Performance.” Academy of Management Journal 43, no. 5: 925-950.
- Kotabe, Masaki, and Helsen Kristiaan.2004. Global Marketing Management.New York: John Wiley & Sons.
- Hooley, Graham, and Saunders, John. 1993.Competitive Strategy: The Key to Marketing Strategy. New York: Prentice Hall.