THE GROWTH AND EXPANSION POLICY IN
THE EUROPEAN DOMAIN
INSTITUTE OF PETROLEUM MANAGEMENT, GANDHINAGAR
Submitted to: Prof Sanjay Gupta
Date of Submission: 15.09.2008
Submitted by: Joydeep Mukherjee
Roll No: 20081020
To: Mr Thomas Zimmerman (Manager, European Sales Division, Computron Inc.) From: Joydeep Mukherjee
Date: 15 September, 2008.
Subject: Evaluation of the Opportunities and Challenges faced by the company The report presents an outlook of the action plan for future growth of Computron Inc in Europe. The analysis has been done keeping in mind the opportunities in the present context, especially the deal with Konie & Cie., AG. Regarding challenges, the feasibility of the new plant in Frankfurt, Germany and the competition faced by upcoming rivals have been duly considered.
The mode of expansion of the company in the European market is the crux of the issue. The company has started its manufacturing in Germany which has reduced the product’s price but further reduction can be done in basis of R&D cost and transportation cost. Factors like compromise on quality of the product, break even analysis pertaining to the investment made, effect of price reduction on brand image and increment in market share both in the German as well as European market has been considered. The effective policy would be to only manufacture cost effective products in the German manufacturing unit with a different brand name.
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European market of the digital process control computers contributed 11% of sales of the company in this fiscal year and in upcoming years a significant growth is expected. The Germany market itself is poised to increase at a rate of 25%/year. The company is at crossroads with investment in Europe; specifically in Germany is on cards. The new found business opportunity along with the trusted brand name has given the company a solid platform to build further on its quality product and brand image. The additional cost, for example import duties and transportation cost will not deter the company to compete on the price quotient too. Market security will provide the company the boost required to go on with the investment at a much rapid manner. Konie & Cie., AG provides an option, but the company has to take into consideration capacity and commissioning time for the new plant, the long term impact on brand image, break even analysis of the investment made as well as future profits before deciding on the path of expansion in European market.
Determine a course of action for the growth and expansion of the company in European market with respect to pricing of products, maintaining quality and brand image, attaining market security, fending of competitors as well as holding on to large consumers and looking at long term profitability of the decision.
Statement of Options:
The modes of expansion that the company can follow with respect to the opportunity in Konie & Cie., AG and also in long term view of the growth in the European market:- 1.Special low cost production only for the deal with Konie & Cie., AG. With setup of the plant in ongoing process there is no issue of major changes. 2.Change in policy with respect to European manufacturing unit. Only low cost and lesser quality products manufactured, under a new name, “Computron 999X”. Branded goods can be imported from the USA plant.
Criteria of Evaluation:
The following criteria are relevant in evaluating any of the options mentioned; a)The level of changes in the price, i.e. the compromise on the 331/2 % mark up. b)Compromise on quality, i.e. precision, dependability, flexibility and ease of operation of the product. c)Break even period of the investment in setting up the new plant in Germany. d)Effect of price...