Executive Summary
The report deals with the introduction of innovation in an organization and how the organization manages the changes that occurred in the organization due to the implementation of innovation. For this particular study, the company selected is Phitone Corp, one of the major players in sensor and sensor-related business. Phone Corp is a specialized leading sensor company. Report focus on identifying an appropriate growth strategy for Phitone Corp which suits the industry environment prevailing now and that strategy should provide a better result and avoid challenges of integration and overpayment.
Introduction
The growth and prosperity of a business are depended on the nature of its operation. If a business is operated with a well thought out plan it will prosper and generate more profits. This is what Michael Porter states about the growth of a business.
This report is intended to present a detailed picture of the factors that make a business grow and the factors that do not make a business grow. For the purpose of analyzing these, the case of Phone Corp is being taken. The performance of Phitone Corp in Capsim is measured on the basis of different parameters after which a conclusion is drawn regarding its performance.
The parameters that are used for measurement of the performance of Phitone Corp are stock and bond market, financial statements, production analysis, traditional segment, low-end segment, high-end segment, performance segment, size segment and market share. The performance of Phitone Corp in Capsim is compared with other companies and with its own industry that is the sensor industry. Among the above factors, financial statements and market share are the core parameters that measure business performance. The financial statements will give a clear picture of the financial performance of the company. Market share is the factor that determines the ranking of a business in the market. Market share of the company shows that how well the company performs among the competitors. A proper analysis of all these factors is being enumerated in this report. The factors that contribute to the success of Phones and the factors that do not contribute to the success of Phones are discussed in the main body of this report.
Main body
The organization that is studied here is Phitone Corp that belongs to the sensor industry. The sensor industry is the sector that produces measuring equipment and other related products. Sensors are also widely used in vehicles. “The number of sensing devices per car has doubled in the past few years and continues to rise as sophisticated but inexpensive sensors become more available.” (Sensor applications: Industry and commerce, sensors on the road, National Science Foundation 2008).
Factors that make a business grow and sustain its growth
The major factors that make a business grow are innovation and entrepreneurship. The sensor industry is concerned more with innovation. Better technology should be developed with sensors in order to survive in the highly competitive market. A company that supplies the most modern technology is always accepted by the customers. “Innovation, timing, a good idea and luck are all ingredients of success in the technology industry.” (Innovation and Entrepreneurship, Real networks, Knowledge Wharton 2008). Therefore Phitone should adopt innovation as its main strategy for success.
Factors that affect business growth
The factors that help business growth can be broadly divided into two:
- Philosophical or Qualitative factors.
- Quantitative or measurable factors
Qualitative factors
Direction and vision: An entrepreneur should know exactly where his company is heading even at the time of starting the company. The vision could be broad or narrow, but it should be there. It should not be vague. For example, a vision to be the best company in the world is too vague to conceptualise. ‘To be the number one provider of sensors in the market is an example of a vision that can be conceptualised by the owners and their employees. Every businessman or entrepreneur should know the present ‘where we are and the future ‘where we want to be’. “It’s a more complex process than it sounds. You must first be sure where you are. Then you choose your destination – your vision. Then you must work out the route, and how to check progress all the way. Then comes the really difficult part: doing it.” (Heller 2006).
Leadership: An entrepreneur should not be just a manager but a leader also. Leadership qualities are relatively common across all fields, whether it is business, society or politics. The entrepreneur should all have all the qualities of a good leader. “Leadership” can be an elusive quality. How does one become a better leader? And what makes a great leader? Although there are no easy answers to these questions, key elements of leadership including communication, delegation, and team building can be studied and developed.” (How to Guides: Leadership. 2008). A leader should be charismatic, should be able to delegate, should be a team player and be able to connect and communicate with his employees. In such a case what contributes to the growth of Phitone Corp is good leadership. A well efficient leader can lead Phitone Corp into prosperity. The leader should understand the need for good innovation for the success of the company. It should be noted that Phone Corporation is a company whose major success factor is better technology. The leader or the manager should have good knowledge about the technology that is used in the business. He should also update himself with the newer technologies.
Management: Along with being a leader, an entrepreneur should also be a manager. In a small company, there will not be too many people in top management positions. The entrepreneur will be in charge of most functions. Hence all the good qualities of a manager should be a part of a good entrepreneur. He should be able to plan well, he should be able to delegate jobs and responsibilities, he should be a good listener, he should be patient and firm and he should be a good teacher. The manager of Phitone Corp should be a well-informed person. He should have excellent knowledge about the industry and the factors that contribute to its success. The entrepreneur is the supreme authority to make decisions for the operation of the company. Therefore the entrepreneur should have high knowledge of how the technology is developed. A person with a good technical background in the sensor industry can take Phitone Corp to success. “Becoming a successful manager is not an easy task. It is not only a matter of making the right decisions for your company but you need to be a good leader which means that you need to know how to encounter and handle various problems. Knowledge is necessary but more important is a good vision on the future of your company and the ability to create a good working team..” (Tongerloo 2008).
Culture: A good entrepreneur will need to have sufficient business culture to be successful. Business cultures will vary from country to country and the entrepreneur will tend to adopt the culture of his country. For example, the business culture in the US is to take the weekend easy and most companies have a five day week. Some cultures tend to be hardworking in nature while others tend to take it easy. “Compared with other countries, the UK office can be a reasonably relaxed and informal environment. Conversations can become personal, humour is seen as a positive and relationships frequently switch between that of friends and colleagues depending on the situation. A new German or Japanese colleague may at first find this unprofessional and lacking in professionalism.” (Business Culture UK). The manager of Phitone Corp should be well aware of the culture so that he can deal with employees better. The motivation of the employee can be improved only when the manager deals with the employees according to the culture. Motivations of employees are very much important for the success of Phone Corp. It is the employees at the research and development facility of the company that develops the sensor products. Good work culture should be fostered in the company so that the employees contribute their best for Phone Corp.
Human resources: An entrepreneur should be good at human resources management also. Some of it may be inborn and some of it may be learnt. But in this scenario, most of it is inborn since an entrepreneur would not have had the time or other resources to formally attend an HR course. There is great relevance for human resources in Phone Corp. Innovations in Phitone Corp is the result of the continuous effort of the research and development teams of the company. Only by motivating them, the company can bring out more innovations in the future. Therefore Phitone Corp should have good human resource management. Motivation is not only important for the employees of the research and development facility but also for the employees in the production department. The quality of sensor products depends upon the performance of employees in the production department. Phone Corp should employ proper employee motivation techniques in the company so that the employees perform well.
Quantitative Measurements
Product: The product is very important in business. It should be something that should be in demand. This of course is commonsense. The important things that are to be considered with regard to a product are pricing, value, placement etc. Product positioning is also very important. The type of customers that are targeted, the variety of products, customer satisfaction etc is important points to be considered. The majority of the products of Phitone Corporation are not used by the end consumers but are used by industrial customers, mainly automobile industries. Therefore the product should be developed as per the requirements of the industries that use it. At first, the requirements of the targeted industries should be examined by the company. The research and development team should be initiated about this so that they develop products according to the requirement.
Market Analysis: It is imperative that the market is studied well. If this is not done properly the type of product that is launched with respect to its demand, price and quality may not succeed. Good market analysis for sensor products should be conducted in order to determine the overall requirement of the industry. Market analysis should be conducted in automobile companies and other companies that use sensor products. One of the peculiarities of the market of Phitone Corp is that it is not widely distributed. The company need not conduct research among the general public. Therefore compared to the consumer products company market analysis for Phitone Corp is easier.
Financing: The right type and amount of finance required for a business venture have to be worked out. The investment required as well as the working capital should be assessed and steps to acquire them should be done. Financing is also a major factor that contributes to the growth of Phone Corp. The investment methods that are to be adopted by the company should be properly worked out. A proper debt-equity ratio should be maintained in the balance sheet of Phitone Corp in order to enhance its liquidity.
Cash flow: Cash is the lifeline of any business. It should be ensured that there is adequate cash available for the smooth running of the business. Money from customers and debtors should not be blocked since it will affect the payments of the company. The products of the company have demand throughout the year. The major consumers of the company are industries. The industries usually order bulk products. Therefore proper measures have to be adopted for enhancing the cash flow of the company.
Research and development: Products have a certain life cycle after which the demand for them will be gone. Adequate research should be done to develop or modify products to remain competitive. As mentioned earlier innovation which is the result of research and development is very much relevant for the growth of Phone Corp. Major Investments are to be made in research and development so that the company becomes the market leader. If a particular technology developed by Phone Corp becomes outdated then it should be abandoned and new technology should be developed by the company.
Technology: Any company should have the technology to research and produce the product that is popular in the market. State of art technology should be used by Phone Corp in order to produce sensor products at low cost and higher efficiency. Products will become technologically advanced only if the production techniques are technologically advanced.
Competition: Competition is both good and bad for any business. It is good because it will keep the entrepreneur on his toes all the time. It is bad because it will affect the bottom line of the company. The entrepreneur should be able to keep a fine balance between the two. Compared to the competition in other industries Phitone Corp will face less competition in the sensor industry. The success of Phone Corp will depend on the personal selling and demonstration techniques adopted by the company.
Benchmarks: To maintain the quality of the products, benchmarks should be set and regular comparison with benchmarks should be done to ensure that the quality of the product is maintained. In this case, the benchmarks to be made by Phone Corp are the estimate of its sales. It has to be finally compared with the actual sales. After that proper measures have to be taken in order to rectify the variations.
Abandonment: Sometimes it might be prudent to abandon a product or line of business that may be unprofitable. In such a case the owner should not hesitate to do so even if it entails loss on the investment made. Since technology is fast changing certain products of Phitone Corp might become outdated. In such a case the products that generate low profits must be abandoned and better products should be developed.
Factors that are not important for growth
Environmental protection act: The environmental protection act will have less impact on the market of the company. Phone Corp is a sensor company and its production unit does not create waste materials that are hazardous to the environment. The government usually formulate certain rules and regulations for environment safety. A business firm has to comply with such terms and conditions of the government. If the firms act against such regulations the government will take necessary actions against it which will ultimately harm the reputation of the company. There are certain instances where the firms are obliged to spent higher cost for environment protection. Phitone Corp being a sensor company is not affected by such factors.
Availability of raw materials: Availability of raw materials is one of the most influencing factors that affect any business. If raw materials are not available in proper time, the production activity of the company will be lagged and it will result in a condition where the company is not able to supply the products at the right time. Thus the overall profitability of the company will be affected by it. Certain raw materials are seasonal and therefore the companies will have to incur additional expenses for storage of raw materials procured during its season. The additional cost incurred for storage will increase the cost of production of the company. But this factor does not affect the business of Phitone Corp. The raw materials that are used by Phitone Corp are available on all the seasons.
Advertisement factors: Compared to other companies Phitone Corp need not advertise its products widely. The major users of the products of Phitone Corp are different industries. Product demonstration is the marketing strategy that is mostly used in Phitone Corp. advertisements are to be made by the company only in industrial journals. There is no need for either bill board advertisement or television advertisement. Therefore advertising has less relevance for marketing the products of Phitone Corp.
Conclusion
The report has given a clear understanding of the factors that contribute and that does not contribute to the success of Phitone Corp, which is a major player in the sensor industry. Even though there are many factors that contribute to the success of Phitone Corp the core factors that contribute to its success are innovation and entrepreneurship. The vision of the company to be the market leader in the sensor industry can be achieved only through better innovation and entrepreneurship. Thus it can be seen that the factors that contribute to the success of a business is related to the type of business of that particular company. The success factors of Phitone Corp may not be the success factors of any other company. The factors that contribute to the success of a business can thus be classified on the basis of the industry. The companies that are operating in a common industry will have common success factors. But there are also certain general factors which are important for business in all the sectors. These factors are leadership, good management, etc. So whatever be the success factors every company should take proper measures to make it advantageous for the company.
References
HELLER, Robert (2006). Business Vision: Closing the Management Gap with Strategic Objectives. [online]. Edward de Bono & Robert Heller’s Thinking Mangers. 2008. Web.
How to Guides: Leadership. (2008). [online]. inc.com, The Daily resource for entrepreneurs. Web.
TONGERLOO, Eric Van (2008). Qualities of s Successful Manger. [online]. Associated Content. Web.
Business Culture UK. [online]. Kwintessetial – Cross Cultural Soultions. 2008. Web.
Sensor applications: Industry and commerce, sensors on the road, National Science Foundation 2008. Web.
Innovation and Entrepreneurship, Real networks, Knowledge Wharton 2008. Web.