Varicut’s Strategic Choice: Situation Analysis Briefing Report

Briefing Report 1 – Situation Analysis
Name of the case: Varicut’s Strategic Choice.
Using the template provided, complete a Situation Analysis briefing. The
questions have been provided as a prompt. You may remove them before
submitting your report.
Issues
 Intensified competition in the label manufacturing market.
 New entrants adopted low pricing strategy to compete, results rapid
fall in profitability margin.
 Possibility of radio-frequency identification products to substitute for
bar-code identification in future.
Strategic Context – External Environment
Issues:
 Intensified competition in the label manufacturing market.
 New entrants adopted low pricing strategy to compete, results
rapid fall in profitability margin.
 Possibility of radio-frequency identification products to
substitute for bar-code identification in future.
 Limited demand for raw material. As company has customer-
focused strategy.
 Criteria’s on the raw materials imposes constraints on
suppliers.
 Company has no bargaining power with the suppliers. (Pp. 10)
The company VariCut has Label manufacturing business which later
extended to Label printing service too.
Labelling product has wide application in industries like retailing,
medicine, food, cosmetics.
The various channels of distribution are selling through
intermediaries and distribution selling.
The industry can yield up to 9.5million labels and has sales of more
than 307 million USD.(pp3)
The industry had been growing by 30 percent growth rate.
The products of the industry are differentiated.
There are high exit barriers.
There are higher fixed costs.
The main competitor is Brother, and apart from that VariMark, King
Jim, Epson and Brady. (Pp. 8)
Brother’s have the leading position and holding of 70 percent of
Chinas market share. (Pp. 8)
The industry is fragmented.
1NABU470: North American Business Policy and Strategy

Briefing Report 1 – Situation Analysis
The basic strategies of competitors are price-skimming and
competitive-bases pricing.
Brother is successful in all the three market levels like entry market,
mass market and premium market, whereas VariMark is successful
in entry and mass market, so is king Jim. Epson and Brady are
successful in the mass and premium market. (Pp. 8)
The competitors respond to competitive strike and counterstrike.
They retaliate as soon as they find a downward fall in their sales
graph.
The vital customers of the industry are the manufacturing
industries, telecommunications, electric power, office management,
medicine, cosmetics and schools.
The consumers of the organization are powerful as the fact without
them the industry won’t be able to sell out their goods.
They are powerful as they hold the entire business sales. The
market of this labelling industry is help up completely by these
customers, because of them the company generates revenue.
The major suppliers to the industry are the electronic component
manufacturer, mechanical part manufacturer the casing
manufacturer. (Pp. 7)
The suppliers provide the raw material which is responsible for
manufacturing of the goods. Thus, they are to be considered
powerful.
The purchase of raw material from these suppliers makes their
business in manufacture its final commodity. No manufacturing
body can run without raw material and procurement; thus, the
suppliers of these materials are very essential to the manufacturer
or the industry.
A market always has some entry or exit barriers. This market also
has some significant entry barriers. (Pp. 9)
Significant entry barriers are technology, patents, start-up costs,
patents.
They protect the existing competitors from getting a further
enhanced competitor burden, and also helps the industries to grow
its profitability.
There is no such substitute for this industry product and services.
Apart from the competitors, no other issue provides pressure on the
price charged in this industry. It belongs from a perfectly
competitive market and thus its main rivalries are its competitors.
2NABU470: North American Business Policy and Strategy

Briefing Report 1 – Situation Analysis
Strategic Context – Internal Environment
Situation analysis:
Long tail business model is been followed by the firm.
The stakeholders of the company are the creditors, directors,
employees and shareholders.
The firm is a limited organization said to be a limited company, the
accountability of the members or subscribers of the company is
restricted to what they have invested in the organization. The firm is
limited by shares.
The firm aims to provide more variety, small volume, flexibility,
convenience and speed. It is very particular about the raw materials
that are to be used and does not deviate from the fact of providing
quality product. It never compromises with the quality of the product
manufactured and always figure out variety and innovation.
The operating features of the company in terms of sales is that it has
annual sales of ¥50 million, comprised with 120 employees, having
net asset of ¥8 million. It is a 12-year-old company located in
Shanghai China. (Pp. 5) & (Pp. 2)
The firm is achieving a competitive advantage based on superior
resources and capabilities in the areas of 1) superior management,
4) a high- performance culture, and 6) effective knowledge
generating processes. 7) The appropriate level and type of
international involvement.
The firm is achieving a competitive advantage from its primary value
chain activities. These activities include 8) inbound logistics, 11)
marketing and sales, 14) technology development. In addition, the
organization have 20) excellent locations, 21) outstanding learning
capabilities. 22) Strong values and ties.
The firm is financially very strong and has a good growth rate. Every year
the firm is growing financially strong and incurring profit.
APPENDICES
External Environment
3NABU470: North American Business Policy and Strategy