Husky Strategic Analysis
Introduction
The company that is being analyzed in this paper is that of Husky, which specializes in the manufacturing of plastic injection molding equipment. Robert Schad is the director of this Canadian company and was largely responsible for turning it into one of the world’s premier manufacturer of plastic injection molding equipment. The company performed well over in the early 1990’s, however, over the course of time, there have been many challenges obstructing its performance. The paper has conducted a comprehensive analysis of the company and its competitive environment. In the context of analysis, the paper has also provided a recommendation for the company to successfully compete in the industry.
Husky’s Competitive Strategy
Husky within a short period has developed itself into a leading manufacturer of plastic injection molding manufacturer. The competitive strategy that is developed by the company is that of product differentiation focus. In this strategy, the company develops uniqueness within its products which makes it different from rest of the competitors. It can be observed that for producing plastics for pet bottles, the machine cycle time is 10.4 seconds compared to 11.8 seconds of the competitors. The average operating hours per day for the machines is also 22.3 hours relative to 18.9 hours for competitors. Average preform weight is also less than that of its competitors.
The machines also utilize less floor space that adds to the efficiency of production. Hence, these factors allow the company to produce superior quality products in relation to its competitors. However, differentiation focus tends to lose significance as competitors compete with similar products and enhance their quality. Therefore, Husky needs to modify its incumbent, competitive strategy in order to successfully compete in the industry and maintain its market share. The products for Husky are charged higher relative to its competitors. Management of the company would need to review their pricing strategies in order to attract customers.
Industry Evaluation
The industry in which the company operates is that of plastic injection molding equipment and related services. It is approximately a trillion dollar international sector for plastics. There are three categories of businesses in the market including equipment manufacturers, resin makers, and processors. The industry was highly attractive for Husky’s as during 1982 to 1996; there was an increase in the consumption of plastic resin at 6% per annum.
The per capita consumption of plastics in Western Europe and North America was more than 80 kilograms per annum. In other places, the annual consumption per person was less than 15 kilograms. Hence, in the context of this information, the industry was highly favorable for Husky due to increased demand for plastics. In the perspective of injection molding machines, there were different companies involved in its production. It is estimated for the machine markets that 80 companies made up 80 per cent of the international sales in the mid-1970’s. On the other hand, in the mid of 1990’s, the companies had reduced to 15, and presently, production of the mold is conducted mostly by SME’s.
Past Success factors
The introduction of a new line of molding systems, customized for the production of PET bottle preforms, allowed Husky to introduce machines for the production of PET preforms. This coincided with the fact that soft drink manufacturers began shifting their products to plastic bottles. Husky managed to take advantage of the new trend and established itself as one of the leading firms in the preform niche by employing certain product innovations. In 1995, it was revealed that the company systems manufactured 60 percent of the world’s preform. It was due to this that the company was able to allocate profits to other areas. Husky sold its products as integrated systems of machines, robots, hot runners, and molds.
The company was popular for its products in speed, durability, resin utilization and ruggedness. The thin wall system could mold around 16 margarine containers in every 6-second cycle, whereas, the system for a competitor would utilize 7 seconds to achieve similar results. The preform system for the company could manufacture a set of PET soda bottles in a cycle time lower than 10-15 percent of the system for competitors. The production innovations allowed the company to offer high-quality products to its customers, allowing it a competitive advantage over its competitors.
Injection molding system pricing
Husky is known to adopt premium pricing for its products. The thin wall system of the company would be priced at $400,000 relative to $350,000 for competitors. It can also be observed that the company charged $1.2 million approximately for preform system relative to the competitors charging $1 million. The company also commonly charged 10% to 20% premium on its products. In the analysis of production cycles, it can be observed that the PET preforms system produces preforms per cycle for 20-ounce soft drink bottle at 48 preforms. The rate is similar to the company’s competitor as well.
The cycle time is also less for the company about its competitors, and the average operating hours per day for Husky is 22.3 hours compared to 18.9 hours of its competitors. The systems for Husky also use 0.137 kWh less electricity per kilogram of preforms than its competitors at 8 cents per kWh. In the context of this information, it is not justified for the company to be charging premium prices for its products. The premium pricing is proving to be counter-productive for the company in the present environment, as there is no significant product differentiation from the competitors. Hence, the customers would be more inclined to purchase similar goods at lower costs. Thus, Husky needs to revise its pricing policies regarding injection-molding systems.
Challenges for company
The challenges for the company in terms of market competition are the strategies for competitors. One of the competitors of Husky is Mannesmann Group that produces a diverse range of steel tubes, automotive components, and industrial equipment. In recent years, the company has made huge investments in telecommunication services and shedding of non-core businesses. The company also made heavy investments in technology which saw its turnaround in the early 1990’s. The machines of the company are considered most expensive in the business and are recognized as the brand of Swiss engineering.
Husky managers perceive the company to be the only one in competing with its technological methods. Another key competitor of Husky is that of Cincinnati Milacron. It also offered three categories of processing technologies that included blow molding, extrusion, and injection molding. The company also established a joint venture with an Indian producer of injection molding machine that made it one of the lowest-cost producer of machines. Husky also faced challenges at the production levels. The manufacturers of PET resin underestimated the demand of resin by a wide margin. There was too little capacity and the prices for PET had increased. In many cases, the processors could not purchase sufficient resins. Large competitors who immediately took measures for competing in this area also noticed the rise of Husky in the PET manufacturing. Hence, the differentiations focus advantage for Husky soon worn out.
Recommendations
The company needs to undertake certain immediate measures to ensure its survival in the industry. Over the years, the company has presented itself as a leading producer of injection molding systems and other services. Hence, in order to maintain its status, the company would need to abandon the premium pricing policies. It would be recommended in terms of pricing policy that the company adopts competitive pricing (Abraham, 2013). This would require it to charge products at marginally lower rate than that of competitors’ products. Furthermore, the company would need to revisit its strategic approach in the market.
The company previously enjoyed the advantage of differentiation focus. However, too many large firms have entered into the market and adopted various methods which have reduced the differentiation factor. Hence, the company would need to focus on cost leadership strategy to gain competitive advantage (Hill, Jones, & Schilling, 2014). Husky has an established reputation and clientele in the market. Thus, in order to attract and maintain customers, measures need to be taken to ensure low-cost production. In this regard, the company would be recommended to consider outsourcing options to places that have cheaper resources and superior technology such as India and China. It would provide cost effective production at the favorable quality.
References
Abraham, S. (2013). Will business model innovation replace strategic analysis?. Strategy & Leadership, 41(2), 31-38.
Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning, New York.
