Strategy and management in international SMEs

Strategy and Management in the International SME

From its humble beginnings in the Porirua Harbor, Vega Industries has come to be the world's most reputed navigation lights manufacturer. The state-of-the-art provider of optical and technological lighthouse and beacon solutions have modernized port, harbor and shoreline safety across the world through supply of efficient, dependable and accurate beacons that are capable of functioning automatically through the use of VegaMAC computer system which is the pioneer in the computer monitoring of lighthouse systems. Under the able leadership of managing director John Rochfort, Vega has been looking forward for new and practical processes to meet the world's most challenging requirements of beacons. Having won numerous awards including the prestigious ISO 9001 Quality Management, Vega ably faces competition on the international front. Due to its technological niche, its product have been accepted by various institutions and the company also provided customized solutions to various clients and even in some cases gone 'extra mile' to service its customers. Because of the strong importance on research and design, and understanding the needs of the customer, Vega has built a reputation of a qualitative, competent and frontline supplier of marine beckons globally. Vega has demonstrated to the world that despite New Zealand's small size and relatively geographic isolation, it has the potency of becoming the world leader.

Introduction:

In the navigation lights industry, New Zealand-based Vega Industries Ltd. enjoys a dominant position due to its revolutionary product Physics and Engineering Laboratory -- PEL Sector Light. Vega was founded in 1972 by a Mechanical Engineer who was also a manufacturer of lens and a businessman, to develop and further make PEL Sector Light a commercial success. The credit of originally developing this light goes to Norm Rumsey who was the Head of Optics at the Department of Scientific and Industrial Research -- DSIR. The Vega PEL Sector Light was originally designed for the specific problems encountered during alignment of two lights at a cliff at 'Goa Point' due to lack of physical space to erect the rear light in a 2-station alignment system.

Due to limited prospects in New Zealand market, Vega rapidly moved into the export market. However, due to the pioneering nature of the PEL technology, there was an initial resistance to embrace the new technology since the lighthouse industry is conservative in nature. In order to solve this problem, Vega focused on those exclusive customers who had enough technological abilities to appreciate the product. Through supply of these leading consumers in the first place, Vega improved its reputation and presently supplies majority of the world's precision sector lights. The path to become the market leader has been mixed. Managing Director, John Rochfort's initial years at Vega were marked by ups and downs in the financial front. Through the continuous success of PEL Sector Lights, it was possible by Vega to fund new research and design proposals that have snowballed to facilitate Vega to cross these initial problems.

In the year 1992, Vega took up a major sector lighting that was supposed to operate day and night for the Port Botany, Sydney, close to Sydney Airport. Since this light would fall on the Sydney Airport runaway, every stray light were needed to be contained. Vega did intensive research and experimentation for 10 long years on behalf of the customer and came out with a solution that was accepted. This demonstrated Vega's meticulousness in tackling difficult problems which other companies within the industry tend to overlook. Besides, in one more major project, Vega supplied a set of sector lights for the Terneuzen locks in Belgium which enabled the huge ships using this channel to align themselves and pass the canal which at some period permitted for just a meter clearance on either side of the 40-metre wide lock.

Situation Analysis:

Vega's core competence has been designing and building lights and beacons meant for marine navigation and other visual signal lights. It is this competence that has helped the company to blend optical and electronics technology to build beacons which are capable of operating automatically and controlled through electronic devices. These have immediate application in lighthouses and other costal sites inclusive of offshore buoys. Vega has a lean workforce of just 25 employees who are specialists in optics, mechanical engineering, electronic and electrical design and software engineering. The number of employees has gone up comparatively slowly in spite of the successful growth of the company. John Rochfort, Managing Director made a recommendation during 2001 that there would be an upper cap of 20 employees because of the collective efforts of a number of factors which are (i) company's decision to keep a rigid grip on growth (ii) having a lean workforce structure with the appropriate competencies (iii) the comparatively small size of Vega's preferred market position.

Due to the inherent nature of the navigation lights industry, Vega has been quick to assess the situation that the market would not support exponential growth, but a sustainable growth which will guarantee its feasibility in future. The company has been launching new aids to marine navigation targeted at improving navigation and dependability and lowering the total cost of lifetime ownership to its customers. Exports constitute 90% of the products with the majority of the products being developed for U.S., Canadian, Australian, Swedish, and Danish and Russian markets. This move was prompted by the fact that its domestic market had limited scope. Vega's controlled expansion and development through a strategic style practiced by John to make the company into a successful global company. He has kept the organization lean and maintained a high level of control over every operation of Vega. According to him, keeping a lean structure is essential in an industry which needs high quality products particularly when their operation is protecting lives of passengers in vessels.

Identifying/Isolating Key issue(s):

Vega has a global reputation for being a leader in marine navigation. Several components of the performance of the company have played a key role to this reputation. These are (i) unique knowledge in optics (ii) high quality products (iii) a sincere and innovative approach in fulfilling needs of the customers (iv) strong relationship with the key customers (v) high levels of capability and dependability in implementing projects. The company has been enjoying the status of market leadership from the time the original product the PEL Sector Light was developed. This was an innovative product and because of this it faced market resistance and uncertainty. But the product became an immensely flourishing product, bettered by constant development and sophistication. Vega's standing for accuracy, quality and product strength was proven when it emerged as the sole company to be awarded with the 'design and build' contract during 1990 for the signaling searchlights meant for the ANZAC frigate. The searchlight is so robust that it can bear on onboard explosion and continue operating normally.

Vega's increased level of productivity along with precision has been achieved by means of an initiative towards computer technology comprised by CNC lathes. Shifting from a manual production method to a mechanized system was witnessed as crucial for the future for Vega. The flagship products of Vega are the PEL Sector Light and VRB-25 lighthouse beacons initially produced for the U.S. Coast Guard. Vega has made major investment in product development for quite a number of years. Another key issue has been that as the company had its own in-house technology base it was able to export its finished product to a lot of countries. This was a unique thing in itself because normally it is the major countries that develop new technology and smaller countries purchase it from them. This was a reverse flow of technology and in this case it was a major country like USA who purchased product from Vega. 18.9% of the revenue of the company is contributed to research and development and marketing accounts for a mere 12%.

Increased intensities of research and development permit Vega to take up design work for other industries which is at least one large system project every year annually. The leadership position of the company is due to the unique abilities of John Rochfort who assumed a diversity of roles like managing director, researcher, and production controller, and has been the moving spirit behind the immense success of the company. The leadership position of the company can be witnessed by visiting the marine installations across the world where Vega holds the number one position. Vega has been fulfilling a lot of the challenges faced by systems to produce accurate and reliable results and capable of withstanding hostile environmental conditions. Several of the products manufactured by Vega have been world's number one. The four important products are sector lights, rotating beacons, LED lights and remote monitoring systems.

To make sure that its products are the most practical and dependable within the market, Vega designs and manufactures its own electronic control systems and builds it own circuit board layouts. The key benchmarks achieved are efficiency and saving of space. Through the use of its groundbreaking VegaMAC system, the status of a beacon can be monitored on a continuous basis through a piece of computer software remotely and any faults reported. This system has the ease of being used in any lighthouse irrespective of its current lighting and power systems. Due to this, Vega is the sole company in the world having such advanced technological and optical competencies. Through the system, all the beacons installed can be monitored from a central location, thereby reducing the quantity of false call outs and identifying faults which require manual attention.

Considering the Total Cost of Ownership -- TCO Vega's product offer a low TCO as their IT products recover the average cost of $30,000 for installation since it reduces the $1,250 per hour helicopter-assisted maintenance. The computer-managed systems have to be fail-proof as any type of false call could cost up to $3,500. This system manufactured by Vega uses the interactive technology capable of permitting technicians to switch lights on or off from a remote location. Vega enjoys economies of scale as it has been in the business spanning nearly three decades. Due to this, the technology used by Vega would take substantial time to duplicate. The market of navigation lights has a high entry barrier as the initial capital costs are very high and the market size is small, hence competitors will not find profitable to enter this business. Apart from that the present development and level of innovation at Vega has rendered Vega's products more and more popular among its customers and more intricate to duplicate and compete with.

Generating and evaluating alternative solutions:

Lighthouses have been around since ages and some dates back to the 19th century. As an alternative solution, the strategy at Vega has been that its product has to be compatible with a broad range of instruments. The VegaMAC, which is computer-controlled beacon, has been designed to be compatible with various technologies like weather reporting instruments, tidal and temperature gauges and to efficiently evaluate their performances, together with the performance of the lighthouse. Another recent alternative solution has been Vega's development of the Light Emitting Diode -- LED beacon that has been successful in creating another core product line. The new LED beacon which is a product of the latest technology is such smaller compared to its earlier versions thereby permitting Vega to develop a capability having mass production. Sensitivity regarding the market is required to be transformed, to make the buyers in order to generate greater awareness of the potential benefit of the product. As regards the price line, Vega although enjoying a market leadership status has never exploited its position to charge a premium price for its product which it could easily has done so.

But, on the contrary it has been sensitive on the price front and has met the market perceptions. The Marketing Manager Martyn Cook who expressed has translated this into practice that people will not be prepared to pay more than a specific price for a buoy lantern despite it having considerable economic advantages. On more alternative approach at Vega has been ethical in business dealings and even going to the extreme of recommending a competitor's product in case it is able to offer a better solution to the problem of the customer. The method creates a number of problem out of which keeping the rest of the market honest is the answer. With the education that Vega gives to its customers, they in their turn mount the pressure on the competitors to stay honest.

Implementation:

Vega's important contract till date has been the development and production of a major lighthouse beacon meant for the U.S. Coast Guard which was implemented. The beacon was required to fulfill the meticulous needs of being solar powered, generating a signal visible from 26Nm, at 1 rotation per minute through the use of a bulb not more than 250 watts. This system was needed to be operational automatically for at least 12 months. Another major project which Vega implemented was providing the sector lights for the Terneuzen locks in Belgium to enable massive ships using this channel to align themselves and approach the canal which sometime lets just a clearance of one meter on either side of the 40-metre wide lock. The year 1993 was one of the most significant years in its 20-year history.