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    Able Corporation and Business Strategy

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    Able Corporation has just hired you for the newly created position of Director of Strategic Planning and Analysis. Able Corporation is an old and venerable American manufacturer of a full range of portable electric power tools (PEPT). The company, which was a family owned business, has been acquired within the last six months by Walden International, Incorporated, a foreign conglomerate which is primarily driven by short-term, quarterly financial considerations. There has been virtually no investment in Able Corporation for several years and as a result, many of the product lines are stale and outdated, the operations are inefficient and costly, and there have been net operating losses in two of the last four years. Also, the president to whom you will be directly reporting has held the position for two years, is related by blood to the previous owners, and has had some part in the development of the previous strategy.

    The company offers a full range of power tools of professional and consumer quality and serves both consumer and industrial channels. With the exception of circular saws, Able's market share is no greater than 3% in any of its product lines. The market share of circular saws is a dominant 40%, with very strong brand equity and loyalty among both professionals and consumers. The quality of the tools, except for circular saws, is considered low to moderate amongst end-users.

    Able Corporation has non-competitive, high product costs due to its two badly placed (in high labor cost, unionized areas) and obsolete manufacturing plants. These plants are so old and have been so badly maintained that some investment must be made in them just in order to remain in business at all. It has been a strategy of Able in the past to drive sales through gaining market share in order to leverage its high operating costs, but this strategy is increasingly being questioned. It is now the general consensus of Able's senior management team that in order for the corporation to survive, Able must do whatever it can to capture greater share in the two growing segments of the power tool market, consumer channels and cordless products.

    Able has had some success in the cordless business segment, and has gained a reputation as a cordless innovator with a couple of its products. Any beachheads that have been established, however, have evaporated as competitors have essentially copied the product and used their superior marketing power to displace Able at the retailers. Able has then moved on to introduce the next innovative product. This strategy of first in, abandon, and move on has been highly debated within the senior management team of Able, with a desire of some to transfer resources from research and development to the marketing and sales departments.

    Able Corporation has little information on its market share, the size of market, the dynamics that drive the market, or its relative product cost positions. No competitive analysis has been performed in years. The internal information that is available to run the business is inconsistent from one functional department to another. The monthly meetings of the senior management team have been reduced to arguments over the attainment of company metrics, with each department pointing to its own set of reports to support its positions. The friction among the senior management team is having its effect on the rest of the employees of Able Corporation. Many of the employees fear losing their jobs due to the acquisition. As a result of years of declining sales and layoffs, a culture of pessimism and failure exists. Indeed, the new owners fear that many employees in key positions will leave the company taking away their industry expertise.

    Walden's top management has come to realize that it seriously miscalculated the underlying financial health and market position of Able Corporation. In addition, Walden has no expertise of its own in the specific product markets or general operating environment of Able. The chief executive officer of Walden is very concerned with making the acquisition a success and has called a special meeting of the Strategic Officers Steering Committee (SOS-C). This is made up of key company-wide strategic experts from across all the business units of Walden. The meeting is to take place in six months and will determine the strategic direction of Able Corporation for the next five to ten years.

    Power tools consist of such products as circular saws, drills, routers, reciprocating saws, planes, and hammer drills. Approximately 80% of all power tools sold are corded, while the remaining 20% are cordless. All things being equal, a cordless tool is comparable in price to a similarly featured corded tool. The cordless segment is by far the faster growing of the two at a compound annual rate of 10% vs. 3% for corded. This is due to its perceived portability and relative ease of use. Cordless tools are locked into their performance by the state of battery technology, which limits battery life, power output, capacity, and size. As advances in technology increase battery life, capacity and output, and decrease battery size, the pace of the growth of the cordless segment increases. At present, the growth rate is expected to remain at 10%, but at any time disruptive advances in battery performance can greatly increase even this high growth rate.

    The U.S. power tool market in which Able Corporation operates is divided into professional and consumer products, consumer and industrial channels, and consumer and professional end-users. A professional tool is defined by high reliability, high durability, and enhanced features. They are built to withstand the rigors of daily use by such tradesmen as carpenters, electricians, wood-workers, and plumbers in the performance of their jobs. Professional tools cost more to manufacture, but are sold at high enough prices to realize higher margins than comparable consumer tools. A consumer tool is defined as lower reliability, lower durability and less features, and is primarily used by do-it-yourself individuals (DIY'ers) for occasional jobs around the home.

    Professional tools are sold in consumer and industrial channels, whereas consumer tools are sold exclusively in consumer channels. The industrial channel has been declining at a rate of approximately 5% per year, for the past five years. The decline has now stabilized and the forecast is for flat growth over the next five years. It currently represents 45% of the total market of all tools sold in the U.S. market. The industrial channel is characterized by distributors that provide a range of greater services and thus higher prices, and its customers consist solely of professional tradesmen. There is much fragmentation in this channel, with no distributor greater than 5% of the total channel.

    Consumer channels have been experiencing a tremendous 20% per year growth over the past five years, and are expected to grow at a 5% rate over the next five years. The growth has been caused by the emergence of the "Big Box" retailers such Wal Mart, Home Depot, and Lowes. These three dominate the market and exert extreme price pressure on all their suppliers, including those providing portable electric power tools. Because of their lower prices relative to the industrial channels, professional end users have increasingly been shopping in the consumer channels. Currently, 60% of all professional end users buy their professional tools in consumer channels, and this number is expected to increase over the next five years.

    In six months you are to present a complete business plan for Able Corporation to the Strategic Officers Steering Committee (SOS-C). You are to provide a mission statement, operating principles, market analysis, company strengths and weaknesses analysis, one-year, five-year and ten-year strategic objectives, sales forecasts, financial and operational objectives, and pro forma financials.

    As a preliminary step in the preparation of the business plan, brainstorm the major elements of the strategic management process. Using the questions below as a guide, provide several bullet points for each major step in the process. These can include insights, issues that need to be addressed, questions that need to be asked, etc.

    A. How would you go about defining the identity of Able Corporation and creating its mission statement? Where would you look for the information? What do you already know about Able that can help?
    B. What are some of the key elements that might be contained in Able's value propositions?
    C. What principle would you use in order to prioritize the implementation steps needed to accomplish the strategic objectives?
    D. What post implementation and feedback mechanisms would you have in place to evaluate the effectiveness of the process? What measures would you use?

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    Solution Preview

    Reference this website as well: http://www.paloalto.com/GRAPHICAL/PDF/STUDIO67_LIVE.PDF, to see an interesting case study.

    As a preliminary step in the preparation of the business plan, brainstorm the major elements of the strategic management process.

    1. How would you go about defining the identity of Able Corporation and creating its mission statement (see information below)? Where would you look for the information (i.e., basically, a mission statement should say who your company is (Able Corporation), what you do (i.e., Able Corporation offers a full range of power tools of professional and consumer quality and serves both consumer and industrial channels), what you stand for and why you do it - so this information can come from the owner and is rooted in the customer needs e.g. before beginning a company, a manager often surveys the community to determine if there is a need for the company that she or he plans to open and during the continuous improvement plans the missions is often re-looked at to assess if it is still meeting the needs of the community via customers satisfaction surveys, word of mouth reports, sales, etc. - and you can also make inferences --see attachment of a sample report.

    The above information tells us the essentials though. What do you know about Able that can help? All the information presented above... I did a very quick analysis and by no means exhaustive - making comments in red brackets for you to consider - read information below on Mission statement and you will understand how this information fits with the mission statement. )please refer to attached response).

    Writing a Mission Statement:
    One of the hardest things for people to write in a business plan is the mission statement. Mission statements can tell a lot about your business, so it's important to take time, look at some mission statement examples, and put effort into writing a good one.

    What is a Mission Statement?
    You should think of a mission statement as a cross between a slogan and an executive summary. Just as slogans and executive summaries can be used in many ways so too can a mission statement. An effective mission statement should be able to tell your company story and ideals in less than 30 seconds.

    How should I write a Mission Statement?
    Here are some basic guidelines in writing a mission statement for Able Corporation:
    - A mission statement should say who your company is, what you do, what you stand for and why you do it.
    - An effective mission statement is best developed with input by all the members of an organization.
    - The best mission statements tend to be 3-4 sentences long.
    - Avoid saying how great you are, what great quality and what great service you provide.
    - Examine other company's mission statements, but make certain your statement is you and not some other company.

    That is why you should not copy a statement.
    - Make sure you actually believe in your mission statement, if you don't, it's a lie, and your customers will soon realize it.

    For more information on mission statements, see sample mission statements at http://www.bplans.com/dp/missionstatement.cfm and one example below.

    Example: Studio 67 Mission Statement
    Studio67 is a medium-sized restaurant focusing on organic foods and an intriguing atmosphere, in a prime neighborhood of Portland.

    Mission Statement: Studio67 is a great place to eat, combining an intriguing atmosphere with excellent, interesting food that is also very good for the people who eat there. We want fair profit for the owners, and a rewarding place to work for the employees.

    Now, using this above, you are now in a position to write your mission statement for Able Corporation.
    Mission Statement: Able Corporation is a ______

    2. What principle would you use in order to prioritize the implementation steps needed to accomplish the strategic objectives?

    Business Planning: Creating and Implementing Business Plans
    - Marketing Planning
    - Finance Planning
    - People Planning
    - Product Planning
    - Supply Planning

    The core of your business plan is your vision for the future. From this vision, you will be able to set objectives for various parts of the business and these objectives will need to be well communicated to all involved to ensure a coherent approach to the tasks in hand. Your business objectives are statements about what you want individual parts of the business to achieve. You may, for instance, have a series of objectives about the financial side of the business, or about its products and services, or about your marketing. The objectives you set create a 'strategy' for the business.

    Marketing Planning:
    From the analysis carried out, you will no doubt have set some objectives about marketing. 'Marketing' is a very broad area of the business - indeed there are likely to be marketing implications associated with almost all your objectives.

    Your marketing plan will include detail ...

    Solution Summary

    This solution-guide provides the student with an extensive discussion on elements of global business strategy for Able Corporation to help the student compile the right information in to their own paper. This solution is structured and is approximately 3000 words.