Introduction
Founded in 1961, the Usha Martin Company has expanded its portfolio, product line, and physical structure outside India. The company has remained one of the most successful steel wire rope product manufacturers.
The company’s current dilemma is how to maintain and improve the past business performance through strategic decision science within its current and future growth plans.
During its six decades of operations, the company has exercised such business strategies as internationalization and vertical integration.
Thus, this analytical treatise will attempt to explicitly review and evaluate the benefits and risks of Usha Martin’s vertical integration strategy and internationalization strategy. Besides, the paper will present a five-year strategic plan for Usha Martin to ensure growth and success in the long term.
Discussion
Vertical integration strategy: Benefits and risks
Vertical integration, as a management style, involves integration of the supply chain to accommodate the different products that a company deals in. The Usha Martin Company boasts of a strong vertical integration in its industrial organization.
From a single location, the company controls its designing, cutting, manufacturing, distribution and marketing process for its steel wire pipe product in India.
The production segments such as raw material acquisition, power plant operation and coal mining, actual production, and distribution are segmented and disfranchised within a systematic control system that monitors production progress.
Benefits
Reflectively, the vertical integration strategy has shielded the company from market swings, which create fluctuations in the supply chain in terms of input availability and price.
As earlier predicted by Mr. B.K Jhawar, the chairman of the Usha Martin Company, the vertical integration strategy enabled the company to save more than one billion Indian rupees. Besides, the company has been in a position to have full control of the quality of inputs used in manufacturing the steel wire pipes.
Since the company operates and fully owns its sub production branches, it has been able to benefit from the aspect of cost competitiveness in production and the final price of the products.
The topological structure of the Usha Martin Company consists of communication and operations management systems, which help in determining efficient performance and optimal resource use.
As confirmed by Mr. B.K Jhawar, the company stresses on quality products, customer satisfaction, and cost effective production within accepted standards at the forefront.
The vertical integration process has allowed the Usha Martin Company to produce, design, sell, and distribute its products globally within a short time span. This is possible due to internalization of a direct and complete control of the distribution and production process for its steel wire pipe brands.
Basically, the vertical integration process at the Usha Martin Company includes the aspects of cost, dependability, speed, quality, and flexibility. These variables determine success or failure in business. These variables are achievable through value delivery, value addition, and creativity within a single production chain.
Reflectively, these concepts are techniques and tools, that are essential in the art of integrating the production and distribution processes.
Besides, this process is inclusive of the scientific aspects, such as a technical process of understanding the operations involved in operations management, their application, and evaluation criteria.
Risks
The major part of the success puzzle for the integrated management operates on the periphery of the soft skills that involve the timeless vision of organizational principles, defining value of the business, determining requirements, clarifying the vision, building teams, mitigating task, resolving issues, and providing direction as incorporated in the vertical integration process at the Usha Martin Company.
However, the vertical integration strategy may prove to be challenging when one of the above soft skills is not balanced. Besides, the strategy is costly to implement and manage.
Since the Usha Martin Company operates in the sensitive manufacturing industry, its vertical integration strategy within the production department may become obsolescent as production technologies change frequently.
Thus, a possible change in the production process for the steel wire pipe product may force the Usha Martin Company to invest in the new technology to remain competitive even if it is very expensive.
Keeping up with any changes in technology would translate into additional costs to match the integrated process with the new technology.
This might hurt the profitability and business sustainability in the long run. Besides, the company may become a victim of disregarding the potential loss within the streams of existing income and eventually forget the initial specialization focus.
Internationalization strategy: Benefits and risks
Internationalization is vital in business management and operations, especially when a company intends to localize production tools such as labor, distribution, and culture in the market of operation. At its inception, the Usha Martin Company concentrated on the local market of India.
The company has experienced growth in the last sixty years and has substantially expanded its markets beyond the traditional domestic market of India.
The Usha Martin Company has successfully implemented its internalization strategy by penetrating and establishing sub branches in more than four countries. The company has active sub branches in the UK, Netherlands, Brunton, Singapore, Canada, Australia, Vietnam, and Indonesia.
Benefits
The company has adopted the strategies of product proliferation and product development to not only achieve the goal of internationalization, but also to maintain its competitiveness in the international steel wire pipes market.
Reflectively, product proliferation is a strategy that companies adopt to create opaque barriers for their competitors. Through this approach, the market share leader will automatically have the discretion to reap maximum benefits ahead of its closest competitors.
For instance, the internalization strategy has ensured that the Usha Martin Company has a market share for steel wire pipes within international markets such as the UK, Netherlands, Brunton, Singapore, Canada, Australia, Vietnam, and Indonesia.
Product development entails the innovation process aimed at modeling the existing product or improving on it to balance with the changing preferences of the customers. The company is associated with new innovations and attractive designs that appeal to their customers across the world.
For instance, a steel wire pipe produced in the international branches is customized to meet the demands of foreign customers. This strategy guarantees increase in the market share for the companies in the UK, Netherlands, Brunton, Singapore, Canada, Australia, Vietnam, and Indonesia.
Risks
When operating leverage, fixed and variable costs of labor should be separated from each other as outsourcing. When implementing the internalization strategy, outsourcing tends to change balance of this ratio.
In addition, in contracting an outside source as a factor of production, there is a need to improve quality of duty for which such a job is required.
This is possible when contract is constituted within acceptable levels of service agreement duly signed. Thus, the company is exposed to market dynamics such as labor laws, cost of production, and product prices within the foreign branches.
Five-year strategic plan
Essentially, the success of product management depends on a proper alignment of a functional idea with the creation of flexible, involuntary, and quantifiable measurement of perception by the target audience.
Reflectively, this idea should have essential elements that can easily sway the mind, either positively or negatively. Knowing how to improve quality is crucial for the growth of a business. In fact, consumers normally go for products that perform best.
Besides, quality improvement will serve the organization’s needs to improve on performance, durability, maintain economic viability, maintain visual and aesthetic appeal, maintain superiority in service delivery, and maintain good reputation due to quality assurance.
Thus, quality improvement deployment and organizational change action plans present an a strategy that would facilitate the business gain in the long term operations through value and quality improvement in the global manufacturing industry. This is summarized in the strategic plan table below.
Strategic Plan
Therefore, the company should consider cross franchising in the business policies aimed at expanding and improving its position, without having to incur much cost.
Cross platform franchising will enable the company to gain a strategic competitive advantage in a number of ways. Further, it will give a company the possibility to reduce the risk of market flop that results from the failure to carry out adequate market research.
Conclusion
The main activities in the control matrix of strategic management is the input and output tracking for the case of the Usha Martin Company. The activities are influenced by environmental, internal, and external factors in the business management strategy.
Reflectively, the process should include organization charts, status reports, process map, compliance requirements, review structure, activities, dates, and resources employed within a specified period of time through benchmarking.
The benchmarking initiative will involve streamlining control activities to ensure efficiency via a proactive quality mitigation channel that reports progress of the intended quality improvement system.