Summery: In this article we take a look at a company Frisbie Tool & Die whose owner has a few alternatives available to him about his future directions. Several analysis techniques are used to determine the company's future directions. This paper has two references.
In this article we take a look at the Frisbie Tool & Die Company whose owner Alex has been building his business for the past 23 years. Frisbie Tool & Die finds itself in a difficult market position, facing competition from imported products and in spite of the strengths that Frisbie has in the form of the experience and expertise of its owner, there are several alternatives available to Alex, the company owner.
In this article, we consider the alternatives available to Frisbie Tool & Die and analyze the company's position. Several different techniques are used and are presented in the analysis section. After considering all the alternatives, a course of action is recommended for Frisbie Tool and Die.
SWOT - Strength, Weakness, Opportunity and Threat analysis
Different analysis techniques have been used to understand the position of Frisbie Tool & Die and to shed some light on the decision that Alex, the owner of Frisbie Tool & Die, has to make prior to making a recommendation.
When doing SWOT analysis for a firm, we are conducting an environmental scan of the firm and looking at its strengths and weaknesses. For Frisbie Tool & Die, the following environmental scan is available.
Alex Frisbie, the owner of the company who has the gift of the gab in sales as well as the technical acumen to design tools and dies for almost any part.
Customers who seek strategic consultancy from Alex and then use Frisbie for sourcing parts.
Alex, the company owner is growing old and has limited time with none of his offspring interested in carrying on with the business. Wife who has been working in sales is also getting older.
Many product lines and experienced staff have been eliminated to save costs and survive. New key personal will have to be brought in over long-term.
Survival of the firm to date in a market which is much reduced due to competitors leaving the market.
Offer by UCANB2 to acquire Alex's business Frisbie Tool & Die and hire Alex and wife to work for them.
Offer by Max Decker to start a partnership with Alex as the lead partner.
Manufacturer in S.E. Asia offering Frisbie Tool & Die a special deal to distribute their product.
Reduced margins in the industry.
Competition from mass produced low margin, high quality parts imported from overseas.
Threat from companies which are carrying full line products and customer preferred them.
No customer loyalty and only price considerations.
Some customers have leaked advice and strategy prepared by Alex to competitors who are using it for their businesses at reduced costs with Frisbie getting only a small part of the business.
The SWOT Matrix for the Frisbie Tool & Die business is shown below. In this matrix we analyze the opportunities that fit in with the companies strengths and those that best cover up its weaknesses. We also look at how the company can best use its strengths to cover up its threats and a defensive plan to cover up its weaknesses and counter the threats.
Alex Decker partnership -Alex Decker partnership and dealership proposal. And dealership proposal.
Threats -Alex Decker partnership -Alex Decker partnership and dealership proposal. And dealership proposal.
Without quantitative analysis, the best course of action for Frisbie Tool & Die is to accept the Max Decker partnership proposal as Max can be trusted, has a daughter who knows the business well and Alex can still have control and say in the business developed by him. The offer of dealership extended by the overseas partner to distribute parts also permits Frisbie Tool & Die to cover risks of competition from overseas suppliers.
Distinct Competencies of Frisbie Tool & Die using Michael Porter's value chain analysis
The purpose of this analysis is to determine how a company which has a set of value creating activities provides its services to produce value which exceeds the cost of supplying the services.
Frisbie Tool & Die provides value by selling its products machine parts to customers who have these requirements. If it is economical for the company, the company can manufacture parts otherwise it can re-sell or become the dealer of some parts manufacturer from which Frisbie Tool & Die can source its products.
The company is an expert in manufacturing and design of machine parts but cannot compete due to overseas labor costs or lack of automation which makes its manufactured products more expensive then imported ones. Perhaps it can still manufacture some specialized and complex parts but not every product.
Once again the best course of action is to partner with Max Decker and accept the dealership proposal that has been presented to Alex so that the company can supply reasonable priced, quality parts to its customers and produce value for its owners with their control.
Analysis of the financial position pf Frisbie Tool & Die
Frisbie Tool & Die is reasonably stable in-spite of the downturn in the market. The company is a sole ownership and hence its financial position is reflected by the financial position of its owner who is currently holding about $670,740 in easily liquidated assets with a monthly expenditure of $9,698. The net worth is $1,627,677 and hence there is money available. The fact that the company's sales are about $1.3 million annually means that the net worth is not very large and the fact that there has been a reduction in Alex's retirement fund by 46% means that the company is loosing money. Something has to be done rather quickly.
Analysis of the alternatives available for owners of Frisbie Tool & Die and the financial value of each alternative
The various alternatives that are available to the owner of Frisbie Tool & Die are analyzed below:
Going it alone and letting things go on as they are: If things are allowed to continue as they are then unless there is an improvement in the market which is most unlikely, there can't be quick improvements. The opportunities presented will be lost and the firm will continue to generate losses with ultimate loss of all the assets in two to three years. This course is loosing money and very risky.
Going it alone and accepting the offer of overseas supplier of cheap spare parts: This is an alternative which will mean that there is a chance of success especially when the terms being offered by the overseas supplier are soft. Introduction of new lines and their marketing will mean that time will be needed as well as money for advertising and marketing of new products being introduced. The main problem, however, the retirement of Alex and wife remains unsolved as there will be no one to run the company when Alex has gone. The returns generated will be moderate and risky.
Accepting the offer of Max Decker and the offer of overseas supplier of cheap spare parts: Both the businessmen are growing old and have successful companies which are similar. Max Decker has a daughter who is fairly experienced in his line of work which is also Tools and Die. There has also been work done by Decker to put in place new methods of supplying and marketing using the internet. With Alex's know-how and offer from overseas supplier of spare parts, the combined firm which emerges from this partnership will have available to it all avenues to compete in the market place and can generate the highest investment return of all with…