Intex is a 14 year old Electronic goods company with its head quarters in New Delhi. Intex covers 8 business areas - Computer Peripherals, PC, Mobile Phones, Consumer Electronics, Memory Products, Retail, Enterprise and International Business. Intex's manufacturing domain is of three manufacturing unit located at Jammu, Nalagarh and Manpura . The units have been producing desktops, multimedia speakers and PCBs (Printed circuit boards) and had also produced UPS, home UPS, notebooks and DVD players in the past. The company aims to vertically integrate backwards into manufacturing of more products. One of the main assets of the company is its team of over 1800 employees with over 9000 man years of experience.(Intex website) That makes it an average of over 4 years of experience per employee. Needless to point out, Intex has an experienced human resource.
Before we turn our attention towards SWOT we will lay the groundwork with the help of a PEST analysis. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. PEST or PESTEL (we will concentrate on just PEST) will streamline our discussion towards a more systematic approach towards SWOT analysis.
Political
Since the base country is India, There are relatively lax norms and lesser regulations to worry about.
The current legislation on IT and IT related products is such that the government promotes foreign companies to have a share of the market.
Inflation rates in India are quite high and these have a detrimental effect on the companies finances as a whole.
the Monetory Policy Committee (MPC) of the Reserve Bank which sets Interest rates is competitive enough to make a venture feasible.
Economical
In India, economic trends are such that those traders flourish which believe in providing cost effective products and services. General taxation on products is also very less in India and furthermore, specific industry factors such as lesser penetration in markets and international trading factors and policies drive the market forces to have a better effect of moulding businesses as a whole In India.
Social
Lifestyle of Indians which is the target consumers of Intex' products is of a relatively modest character. Indians on a whole do not like to splurge and thus luxury brands have less takers. Also studies have led to the conclusion that the buying pattern of the average Indian veers towards a more cost effective item than a costly one albeit of a lesser build quality.
Advertisements are necessary to make the brand presence known to the masses and so expenditure on advertisements also lead to a significant billing in the financial statement of the company.
Technological
technologically the Indigenous companies are not highly advanced or specialised. They are an extension of
the core researches. The manufacturing capacity of the companies situated in India in the It sector is relatively high in volume and less in quality. Furthermore, consumers have relatively less use of highend products and that makes it a deciding factor on whether the feature is worth the input or can the product do without the particular functionality.
A SWOT analysis of the company will better our perspective on the factors affecting the company in its entirety. " A SWOT analysis should not only result in the identification of a corporation's core competencies, but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources" (Wheelen, Hunger pg 107).
Strengths :
Experienced Work Force (avg 4 years work exp.)
Vertical integration of most products.
Not dependent on other companies to function
Streamlined distribution of products from manufacturing unit to consumer.
Cost effective pricing makes it popular in price conscious markets
Weakness:
Products perceived as not durable
Relatively lesser number of manufacturing units.
Weak brand value
Not into varied markets i.e relies on certain core markets to ensure profitability of the enterprise as a whole
Needs to invest in R&D
Opportunities:
Needs to make its presence felt in international market
Can be a leading low cost computer peripherals supplier for European markets.
Threats:
Newer products have made some products obsolete.
Current downturn in global economy has led to a lesser demand for IT and ITES.
Competitors have an added advantage of having global presence.
In case of Intex corp. analysis of its working and business model as well as analysis using SWOT and PEST have revealed that in order for the company to survive in the current global economic downturn, the company needs to seriously revamp majority of its current ventures as well as rethink its strategies and build up on its core competencies as was initiated by the company mission statements.
As observed from the above, Intex has been a leading provider for IT and IT related products for over 14 years. The core business of the company is the UPS. The company is ranked in the top three brands in UPS segment in the country according to the company's website. Other products and services that are offered by intex are computer peripherals, Speaker systems, PCB's and desktops, the more profitable of the above being the UPS. Also coming to the general demographic of an average Intex employee, the upside of the employee demographics is that Intex has a relatively experienced staff and this makes Intex a forceful company that has a highly skilled workforce. These and many other factors affect the overall position of the company. Also apart from the employee demographics, the place where the company is located also has an effect on its health. India is a country that has a huge workforce at an affordable price. The reason for the same being the favorable exchange rates in the global economy which makes hiring a skilled workforce in India cheaper than their counterparts in other parts of the world. In case of Intex, the market that the company targets is consumer electronics and peripherals in India. Intex has a USP of being a low cost low quality consumer product. This makes it particularly endearing to a market like India where consumers are generally more cost conscious and opt for low cost items rather than expensive counterparts. That being said, the reliance of Intex on its own manufacturing capability in case of Vertical integration is one of the key factors that will affect its position in the economic crisis.
Recommendations:
Intex has invested a lot in backward vertical integration and this is something that will work out in its favour in the global economic downturn. In the present crisis, the deciding factor is how the company will utilize its resources effectively to remain profitable in the long run and to survive the backlash. What I propose in case of Intex corporation is to curtail its advertising expenses. Advertising industry is the industry that is the first to be hit by economic downturn, The reason for the same being the sudden cost cutting strategies adopted by various companies.
Point by point the steps the company can take to ensure survival in global economic crisis are enlisted below:
Seek out ways to curtail corporate expenditure which will entail cutting back on advertisement expenses which will ensure more finance for pursuing other goals. This step is taken to ensure that company does not spend more than feasible amount.
Intex can look forward to collaboration with a multinational and well established company and join it in an alliance that will make its presence known In the global market and open up new markets for it to sell its products and services. The reason for this is that in a joint collaboration, there is lesser risk involved as there are more than one interested party involved.
In case of any existing debt that the company owes, it will need to reschedule the debt so as to reduce the impact on the company finances and avoid the company from suffering due to deficit of resources.
In global economic crisis, there is not a single solution for the problem. Rather, it is a culmination of several steps that have to be taken to ensure that the company survives the turmoil. These may include several cost cutting strategies such as cutting advertisement budget as mentioned in point no. 1. Other steps involve downsizing, improving the performance from existing resources, removal of unnecessary perks and bonuses.
Intex already has a solid foundation of backward vertical integration. What is required now is work on the forward integration side. The majority of Intex distributers are third party businesses that aren't Intex related and thus come between the consumer and the manufacturer thereby increasing the end cost of each product.
As stated in first section, Intex has three major manufacturing units that take care of majority of the production, there isn't much sense in expansionism I the manufacturing side in the economic crisis. But rather, instead of spending on a new manufacturing unit, what the company can do is to invest in selective product innovation to keep the company competitive.
Also, due to the recent global financial crisis, a lot of companies may be facing a severe fiscal deficit as well as a threat of bankruptcy. It is the perfect time for a company with surplus budget to look forward to horizontal integration and Intex has an opportunity to incorporate several startups that have faced the heat of economic instability to boost the company prospects in the long run.
As a direct result of economic slowdown, corporate downsizing shows its head. Intex has a dedicated staff of trained and experienced professionals which is their forte. In case of Intex, it would b unadvisable to venture into the field of corporate downsizing as it will lose one of its core assets if it does so. Instead, Intex can look to shut down poor performing product lines and concentrate on its core competencies like popular products and similar.
All the above comprise the various retrenchment strategies that should make the company equipped to bear the economic crisis.
Reflective journal:
In case of business analysis of the corporation in question, the various propositions given to ensure that the company survives the economic downfall is based mainly on certain aspects of business organization that makes it subject to the veracity of the assumptions made earlier.
First and foremost, the recommendations given for the strategies the company needs to follow will be enlisted in detail and explained. The first recommendation is cutting back on advertising expenses. The reason for the same here is logical. In the global economic crisis, revenues are severely short and as such, companies need to take care that they cut the excess expenses and concentrate on keeping the company going. As such advertisements is the one field where the company can make cuts without any severe repercussions.
Secondly, a collaboration with another company was proposed. A multi national company at that. Seeing from intex's portfolio, there was a concentration of intex's share in Indian markets and none whatsoever in the global market, so in order to expose the company to the international market, it is essential to form an alliance with an international company so as to introduce intex to an already established giant.
Debt repayment in case of economic slowdown will need to be rescheduled as if it is not, the company may face severe liquidity issues and thus lose ground to other companies.
Seeing that the company holds a favorable backward vertical integration, it may as well opt for forward integration as well to ensure that the company gains maximum profitability by the fact that everything is done by the company and there are no middlemen. This will ensure that the company will keep their rates competitive and can also provide cheaper products and services without hampering the profitability.
Coming to the point of taking over of startups and other smaller companies. The logical reason for the same is that the economic crisis leads several companies to the brink of bankruptcy and if any company has a good financial situation, it can profitably take over several smaller companies to have better future prospects and also have a scope for diversifying its base.
References used:
David, F Strategic Management, Columbus:Merrill Publishing Company, 1989
Chaffee, E. "Three models of strategy
Machosky, Michael (February 13, 2006). "Vertical Integration"
Martin K. Perry. "Vertical Integration: Determinants and Effects".
Johnson, G, Scholes, K, Whittington, R Exploring Corporate Strategy, 8th Edition, FT Prentice Hall, Essex, 2008
Mehta, S. (2000) Marketing Strategy
Menon, A. et al. (1999). "Antecedents and Consequences of Marketing Strategy Making"
