Report on strategic options open to Elite Plastic Packaging Introduction Elite Plastic Packaging (EPP) from the financial data given is clearly out performing other companies in the Print and Packaging division – indeed 20X6 has seen it, apparently, become the only profit maker. The operating margins you are generating(40.3% in 20X6), although not excessive for a manufacturing firm looking to cover significant overhead costs, are way beyond those gained by other companies in the division and the group as a whole. This should provide a sound basis for arguing your case for the move into America and Asia but the conservative nature of the Group Executive and your own Divisional Chief Executive make a careful and well prepared and argued case for such a strategic move an imperative. Consideration of alternative market entry strategies
EPP has achieved significant growth to date through a combination of product and market development. Importantly, this has not led to diversification away from the core business which is important bearing in mind the 1990s experience of the Group Chairman and Chief Executive to previous geographic diversification. The move to becoming a global operator does inevitably involve taking on more risk – which ever the preferred route. The generic strategy of Elite Packaging to date has been that of a focused differentiator, specializing in plastic packaging for food, drink and confectionery manufacturers solely within the European market. From the information given I assume that growth has been largely organic with little experience of growth via acquisition or strategic alliances. This lack of experience of alternative routes to growth may influence your own perception of risk between the four entry strategies but there may be experience and expertise within the Sigma Group that you can use, both prior to making a decision and once the decision is made. It is important to examine your own and your superiors’ assumptions about the options available. As presented the options are very much ‘black and white’ but a combined or ‘hybrid’ option, e.g. entry into the American market via subcontracting and into the Asian market via a green field site route may be the preferred route to global operation. I have considered each option against the three tests of suitability, acceptability and feasibility and this in turn reflects my perceptions of the key stakeholders who will take the decision(s) – namely, Tim Sterling, your immediate superior and the Sigma Group Executive. Entry strategy 1 – License technology
In terms of your personal ambition to be a truly global player this option is less likelyto achieve this, as there will be no global recognition for the Elite brand and high dependency on the choice of partner. This choice may be limited, as they will require similar technology know-how and access to an appropriate customer base. It also fails to establish a global presence for the business for new opportunities in the future. This is unlikely to be seen as acceptable to you, but clearly it has relatively few resource implications – though the managing of the licensee will require a different set of skills – and feasibility is, therefore, reasonably good. In terms of presenting are as one d case to your superiors, you are likely to get a positive response in terms of acceptability of its being low risk and relatively quick to implement, though the low return may cause adverse comment. Once you have licensed, control passes to the licensee and there will be no guarantee of commitment or performance. The strategic management style of the Group Executive places the responsibility for showing feasibility in the hands of the sponsoring firm and division but the low resource demands of this option may appeal to Archie Williams. Entry strategy 2 – Greenfield sites
By inference this would seem to be your preferred option but one that will take some considerable time and effort to convince the Group Executive...
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