Applied Research Technologies Incorporation Analysis

Introduction of Case study:-

The case study is about the Applied Research Technologies Incorporation, which is an emerging corporation in the field of technology. Company has built up its strength from mergers and acquisitions in the year of 1980 and 1990. As a result, in the year of 2006, the ART portfolio consist of 60 business units having major divisions of Industrial automation, Health care, HVAC (Heating ventilation and air conditioning) and Water management Division.

Backbone of the business:-

Innovative Culture:-

The company success is based on the innovative environment and friendly culture for the entrepreneur mind people. The encouragement for innovative ideas can be idealized from the fact that company spends double money on supporting innovative ideas from the other industrial companies.

This innovative culture comes from the top, because the CEO (David Hall) encourage employees to spend half day in a week in brainstorming, problem solving and experimenting which is referred as “tinker time”.

According to the CEO, he likes to have meetings of managers and innovators so that new ideas emerged. According to him, it is the fact that you will not succeed every time but we should celebrate worthy attempts even they are unsuccessful.

Knowledge Sharing:-

Knowledge dissemination and sharing is also a promising picture that reflects the cooperative culture of the company. Experts of different department help each other in the successful completion of the project as well as problem solving.

Funding to entrepreneurial ideas:-

As discussed earlier, company serve significant amount of resources on innovative ideas. Whenever an idea comes which successfully complete the beta batch production and market potential analysis process also called “proof of concept”, quickly the resources are put behind the idea.

CEO of the company wanted to minimize the period from the emergence of idea and the successful launching of commercial product. To convert this idea into reality company introduce a program which is referred as” fast track pipeline”, the main purpose behind this activity is to provide additional resources for the high priority projects.

Competitive targets and executive compensation:-

As the structure of the company belief on decentralized decision making, so to coordinate the activities toward the completion of business as well as corporate goal highly performance targets are set followed by executive compensation.

In 2006, the company gives the target referred to as 10(sale growth 10%)/ 15(pretax margin 15%)/ 20(return on investment).

Work force Diversity:-

CEO of the company wanted to have a global presence. For this, he not only want to expand his business in different geographical areas but also to open its branches in different areas to grasp the talent and utilize for the further development of the company. In response to this idea, R&D group of ART has opened Indian Technical Center (ITC) in 2000.

Filtration Unit:-

Our main area of discussion is regarding Filtration unit that struggled hard to reach at a success level. This business has been acquired in 1996 from oil and gas Service Company. Its core products are relating to the Government requirement of recycling of water at drilling sites and well heads.

A change comes into this business when a 32 years old manager is hired for this unit called Vyas. Having an enthusiastic personality, he immediately starts hiring innovative and creative mind people into his team. Janice Wagner is one of those hired people who have already worked as marketing department of HVAC division of ART Inc.

Small scale Oxidation Unit:-

Vyas has a strong belief that innovation is the key to success. So to make an innovative culture more strong, he hires a team of technology evaluation. During his review of current and some near past project, he came to know that ITC was working on a project of water purification for developing countries water problem. This small scale oxidation project had been set aside because of increased cost.

Market analysis:-

Vyas closely review the project and convinced that it could be a considerable idea. ITC was so much motivated and developed a promising design of the product. They claimed that this product can process approximately 2000 liters of unhygienic water.

Vyas was quiet satisfied that the product would be a successful one but he also asked Wagner to arrange a brief market analysis. After her analysis, he pointed out some facts:

Only 2.5% pure water was available in the World and most of them was frozen.

1.1 billion people suffered due unavailability of pure water.

3.1 Million (90% children) people had been died in 2002 as a result of diarrheal diseases.

On these finding and promising design of product enforced Vyas to pursue the project. In result he gave a “go ahead” sign to ITC technicians and also asked Wagner to make a comprehensive market analysis of potential customer, so that the product would be developed according to the target market demand.

After market assessment, she give the report about target customer. In his report he pointed out following customer.

For Developing Countries:

Purified water is required for drinking.

For USA

Residential landscape irrigation.

Disaster relief.

Military.

Commercial landscape irrigation.

Farms etc.

She also claimed that many other industries of China, Europe, Canada and USA were trying researching on this type of product but our design was probably the superior one.

First generation product:-

Vyas team targeted the developing countries customer who suffered from infected water. Team contacted with funding agencies and made the small scale oxidation system for field testing. This was unfortunate that regardless of too much research and hard work behind the product, it was failed because of significant smell was still found out in the purified water.

In the result, funding agencies rejected the projected.

Second generation product:-

Although the failure of the product was a big disaster for the Vyas, but he came up with a new enthusiasm and tried to turn the tables over. The team decided to work for another group of potential customers that was mentioned in Wager market analysis report.

In this time they wanted to manufacture a product for “military and disaster relief NGO, s”. They refocus all their efforts and at the end they succeeded to overcome the odor problem. But in this time problem caught them in another way, due to high power requirement a frequent battery replacement was a necessary outcome. So, no order would be expedited in near future.

Third generation product:-

It is the reality that there were two consecutive failures but the Vyas team still thought that it was not the end of story. They made up a new plan and demanded $2 Million.

A new six person development team was designed by Vyas who had smart project management and leading skills. The team work tirelessly for the completion of three phase model of Cynthia Jackson (Vice President of Water Management Division). Cynthia Jackson gave a three phase model for third generation product:

Market analysis.

Technological development.

Business planning.

Phase 1: Market analysis and product concept:-

Before starting the product idea, Wagner took the responsibility of market research of product. This time focus was on the residential water purification. In this sector, she wanted to analyze that cushion was available in domestic agriculture applications or not.

She found in her research that there was a water scarcity problem in the Western and Southeastern region of USA. Due to this reason government imposed restriction on the usage of water for residential irrigation. Also, when the water was used for irrigation then the lower quality water could be accepted.

It was also indicated in the research that domestic water treatment market generate sale of app $9 Billion. Also, sprinkler units available in the market were ranging from $1800 & $4000. So Wagner was quiet sure about the positive response of the market regarding this product.

After the research had been made, the team compiled the results and for the Residential irrigation mini-oxidation system (RIMOS) decided a retail price of $2000. But there would be significant discount on price per acre for Agriculture irrigation large oxidation system (AILOS).

Vyas and Wagner formed a formal report including all the research analysis and recommendation of the prices for the approval from Jackson.

Jackson response on the research was not satisfactory. She had concerns on many issue. After reviewing all the report, she advised the team to reduce the cost of the project either by rejecting RIMOS or AILOS. Vyas and his team agreed upon the rejection of AILOS and decided to unite the efforts for the success of RIMOS project.

Phase 2: Initial design and product specification:-

Vyas and his team immediately started working on prototype. They should restrict the design in such a way that the cost remain at the level, given in the research. They wanted to convert the design of generation one product into the new product for irrigation. The managers had to face many challenges; one of them was a situation of misunderstanding between researcher’s team of India and United States. The conflicting point was the delay in production design deadline. The Indian researcher had clarified that wanted to develop a design that satisfy the needs of the customer. They clarified that there is no need to rush and the product design would be finalized after proper testing. The reason behind such a watchful way of developing the design was the threat of failure and that was not acceptable in any case.

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Jackson was quiet satisfied because the team showed their strong willingness and put efforts for the success of product. But she also advised to use the full internal resources of ART Company. Vyas found out managers and engineers with the help of Jackson form HVAC and Healthcare divisions who coordinate with the team. They suggested some production specification and design changes with resulted in the cost reduction.

Phase # 3: Business Plan:-

The business plan was a real challenge for Vyas and his team. Anyhow they put all their efforts and made a sale projection, cost elimination plan, product concept, marketing plan and cost projections for RIMOS. They also still believe that there was a big market of water purification for the underdeveloped countries waiting for them.

Although the team worked with full commitment but Jackson challenged the pro forma report of financials and instructed the team to review the assumptions given in the report.

On the other hand, Vyas and Wagner were pretty sure that the research was quiet satisfactory and had been worked out with due diligence by technological and manufacturing experts.

Jackson was also concerned about the price of $2000 and advised Vyas to closely observe the risk linked with it. So, the teams also made a risk assessment. The results showed that:

Company should take a close look at beta batch that helps to reduce flaws.

Price could be justifiable by increased water efficiency.

Competition could be low because of the global impact of ART, its after sale service, distribution channel and supplier relationship.

Market acceptability could be increased by highlighting the ART name which has significant value in market. Also distribution channel of HVAC should be used.

Decision for the project:-

Vyas was still thinking whether to accept the proposal or to reject it. He knew that his team has the required potential for gaining success. His team was absolutely sure about the good performance.

On the hand, Jackson heard from grapevine that Vyas had received the funding request of $2000. She was thinking over and over again what would her answer when Vyas came for approval. She knew that her action would be watched critically because many managers of her division think that filtration unit caused to much loss and this is the time to set aside the project.

Porter Five Forces Analysis

(Figure.1) Willingness to pay

Value for the customer

Porter five forces analysis consist of following:

Price

Bargaining power of customer.

Bargaining power of Supplier.

Threat of new entrance. Cost

Competitive rivalry within an industry.

Threat of substitute.

Bargaining power of customer:-

First of all we have to understand the logic behind power of customer. We can clarify our mind from the figure.1, if the price of the product is lower than the willingness to pay range, power of customer is low and vice versa.

When we look at the whole scenario, we came to know that filtration made many researches regarding the target market. They have made the prototype for several times and for several types of products. Also a comprehensive study had been conducted to rightly identify the product price with respect to value given by the product.

Now to comment on the power of customers, there are two divisions:

Bargaining power of customer for first two generations:

The product of first generation is highly demanded in the marked. Also the target market was quiet perfect for the product. If the prototype became successful in that time then bargaining power of the customer would be lower than supplier (also depend upon the price charged).

Same would be the case with Second generation product. Although the product was a good solution for military and disaster relief activities but the price at sale cost will be very high. Customer had to spend too much money on continuous changing of the battery. Due to this reason customer may be on upper end. So the company realizes this fact before time and leaves this plan.

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Beginning power of the customer for third generation:-

In the third which was under consideration, I believe that the product is a good solution for the customer and available on compatible price in relation to the competitors. As US government had imposed restriction on the landscape irrigation so for landscape irrigation people have to purchase these types of products. So there is a bid market available. Company also has brand equity because of its customer relationship, global presence and speedy & efficient distribution channel. So, as the value of product is high, bargaining power of seller is also high.

Bargaining power of supplier:-

Bargaining power of supplier can also be described for the three scenarios separately.

Bargaining power of supplier for first two generations:-

Bargaining power of supplier would be very high for the supplier if the odor problem could be solved (also depend upon the price of the product) because the target market chosen by the supplier was quiet demanding for that kind of product.

Same would be the case with second generation where target market was properly set, product had a value for the customers but in the end same problem occurs with the company and rather than solving the problem they start thinking for the new product.

Bargaining power of the supplier for the third generation:-

In this situation, if the product is launched successfully, bargaining power of suppliers will be slightly high. The reason behind that the value of the product will be high for the customers because of government restriction on water irrigation and compatible price. Also the company has its distinct value in the minds of customer regarding its quality, after sale services and distribution channel.

Threat of new entrance:-

Wagner had analyzed the market for the first generation and pointed out that many private and government sector’s R&D efforts had been in progress for the purification plant but finally she gave the remarks that our technology was the best amongst all up till that time.

For second generation, cushion of success was available as Wagner had pointed out this factor in her analysis.

For third generation product, competitors are already into action and new comers are also expected. But the advantage of the company is its compatible price, its global presence, distribution network and suppliers relationship as compared to the competitors.

Competitive rivalry within an industry:-

We can perceive from the case that competitive rivalry was very high in the first generation because Wagner analysis highlight the Europe, USA, China and Canada government and private sector companies, already working on such a product. But she was also sure that ART technology was far better than the competitors. Also the significant global presence of ART along with the enthusiastic distribution channel and after sale service increases the value of product in the eyes of customers.

Competitive rivalry factor is always present in most of the industries dimensions. So this factor is also present in second generation.

Competitors are already present in third generation product but as discussed earlier company has a distinguishable position in the market that leads towards high brand equity. Also price and quality of product is some what same as compared to the competitors of the market. So there are bright chances of the success in the market.

Threat of substitute:-

Substitutes are available for the generations but the technology and brand equity provides special edge to ART. The only lacking factor was the lack of consistency. When we take a look at the case, we came to know that when a problem occurs in the product they simply reject the product. The rational behavior should be that they have to think over the problem and solve it rather than leaving the project and put all the effort into loss.

Pestle Analysis:-

By Pestle analysis, we mean to say:

P = Political analysis

E = Economic analysis.

S = Social analysis.

T = Technology analysis.

L = Legal analysis.

E = Environmental analysis.

I will explain each part separately.

Political analysis:-

Third generations product is most effected from the political point of view. Third generation product is actually related with the irrigation of residential landscape. But as the case suggest that due to less rain and increasing population growth extreme scarcity of water take place in the region because of that government impose limitations on landscape irrigation. Now this political move causes increase in the demand of the product. So this government action is affecting the demand positively.

Economic analysis:-

While making the analysis of the product target market and product acceptability, one thing that should be kept in mind is the economic condition of the target market. Because it may be possible that there is a need of product, people are willing to purchase and product contents are absolutely matched with the needs of target market but only due to high cost incurred on the production process it is away from the reach of market. This was the case with second generation product where a problem of consistent change would cause an increase in cost of product that is unacceptable for the target market.

Social analysis:-

Social aspect also disturbed the ART progress regarding this filtrations unit. Corporate R&D section of ART opened ITC and water purification project concept emerged from that unit. But due to difference in social values and culture of the two different continents, there was a situation of misunderstanding & communication gap exist between head office and this unit. We can see the confusion among both units, when mini-oxidation plant face a problem of odor and project will be closed that make the ITC technicians harsh. Some situation happens when the third generation product design becomes late.

Technological analysis:-

ART has advanced technology but the only issue is regarding proper research, effective utilization of technology and consistency. In my view when first generation product faces the problem of odor, there would be a need to reorganize all technological aspect and a R&D operation would be done with new passion. It might be a chance that the result would be in companies favor. Same will be the case with second generation product.

Legal analysis:-

There are minor legal issued faced by the organization. Only the restriction of landscape irrigation is a legal issue that proves beneficial for the increasing demand of the target market.

Environmental analysis:-

Environmental factor also have a some effect on the existing scenario. The target market of the generations has some environmental characteristics that collectively results in the emerging needs of the products produced by the ART business unit.

For example polluted water of underdeveloped countries increase the need of purified water and lack of rain & increased population results in the demand for landscape irrigation product

Strategic group analysis:-

ART has many business units depending upon the different type of products they have provided. Corporation has brand equity in the market due to its after sale services, customer satisfaction, global presence and distribution network.

IF we look at the strategic strengths of the organizations on over all bases, we came to know that the corporation has a strategy of growing itself with innovation and entrepreneurial activities. And knowledge sharing & dissemination helps to achieve the target. “Tinker time” is a helping step to achieve that strategic goal.

Strategic analysis has another view; filtration unit is a part of the corporation. Having core product of water treatment for oil and gas exploration that meets the government requirement of recycling. The case shows a sort of strategic mistake from the point of view of management while new project was under progress.

There is a lack of consistency and lack of commitment that can be seen easily. First generation product came into the field-testing phase after the lab test had been completed. Then, why this problem not be shown in that phase? May be that would happen because of careless attitude while testing or may be the product quality in lab test was different from the field-testing product quality? Even then, if product faces odor problem, the management should encourage the ITC technicians to overcome the problem rather converting the face of project in different way.

Same will be the case with second generation product which shows a careless attitude of management as well as lack of strategic vision regarding the project.

Key Success Factors:-

If we take a birds view of the case, we can easily assess that innovation, entrepreneurial activities, knowledge sharing and dissemination are the four active participants that guides ART towards the success story. Corporation has an urge to achieve competitive advantage over rivals through these factors. CEO advice of tinker time is an example of the innovative vision of the corporation.

Key drivers of change in selected industry:-

After the two failure of purification water project, now the company stands on a crucial point regarding the decision of investment on the landscape irrigation project.

The under discussion industry should keep the vision of innovation and entrepreneurial activities in mind but to achieve a goal this business unit also needs to be more disciplined. Managerial decision should be taken by keeping in view the broader aspect and by analyzing that what impact this decision would be on whole Corporation.

Following are the point that should be kept in mind if the company wanted to have success in this project:

Critically analyze the market analysis and financials of the plan.

If that found to be practical, make the prototype version followed by field testing production.

If the product gets success in field testing production then company has to move toward marketing and production.

Regular innovative change not only helps to sustain a competitive advantage but also create value for the customer and then increased value can be enjoyed through fruitful profit generation.