NABU470 - Strategic Analysis of Varicut's Business Choice Report

This report presents a situation analysis of Varicut Shanghai Electronics Component Company, focusing on its strategic choices in the label manufacturing market. The analysis begins with an overview of the key issues, including intensified competition, low pricing strategies of new entrants, and the potential for radio-frequency identification products to substitute for bar-code identification. The external environment section explores the product and service offered, channels of distribution, industry size, growth rate, and competitive landscape, including major competitors like Brother, VariMark, King Jim, Epson, and Brady. The internal environment section examines the company's long-tail business model, stakeholders, competitive advantages (superior management, high-performance culture, effective knowledge generating processes), and financial performance. The report also includes PESTEL, Porter's Five Forces, SWOT, and Value Chain analyses. The report contributes to final grade 10%.

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.
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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.
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
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Briefing Report 1 – Situation Analysis
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
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Figure 1: PESTEL analysis tool
Figure 2: Porter’s Five Forces tool
Internal Analysis
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Briefing Report 1 – Situation Analysis
Figure 3: SWOT analysis tool
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Briefing Report 1 – Situation Analysis
Figure 4: Value Chain Analysis tool
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NABU470: North American Business Policy and Strategy