Abstract
Hilti Corporation is a multinational company which was founded in 1941 by two people; Martin and Eugin Hilti. The company started its operations in Schaan Liechtenstein with a mechanical workshop. Ever since, Schaan Liechtenstein has been the company’s headquarters. The company’s core objective is to manufacture and market construction products, maintaining products and participates in mining industries. Examples of products produced by the company include: electric drills, laser products, power saws, fasteners, heavy angle drills and many others.
In its expansion process, Hilti North America (HNA) was founded. Its growth could be attributed to online mode of sales and its retail sales store which are strategically located. In its corporate responsibility role, the company established Hilti foundation whose presence has recorded a substantial cohesiveness between social and cultural affairs. The company boasts of over 20000 employees worldwide.
This analysis will establish the trade agreements of the company, source of capital and the challenges faced and the extent to which they have ventured in the local and international market. Further, the analysis will evaluate the sales marketing strategies that have been used to enable the company counters the competitive forces.
How does International Trade Agreements affect Hilti Corporation?
International trade agreements are contractual treaties that guide companies that engage in trading together to caution each other from exploitation at the expense of their rivals. Such agreements enhance an equal competitive ground for all. Such trade pacts between or among countries result in reduction or waiver of tax tariff and other trade restrictions. Hilti Corporation has been able to easily penetrate international countries to search for new markets especially within the member states. Examples of trade unions that Hilti is part of are European Free Trade Association (EFTA), North- America Free Trade association (NAFTA), World Trade association (WTO) and many others. In addition, it is a member of European Economic Area (EEA) which enables it benefit from European Union (EU) market.
These trade pacts have been the driving force to the company’s market and revenue growth.
Who does Hilti trade with and why?
One of the major bilateral trade pacts is between New Zealand and Liechtenstein. From the diplomatic relation between the two countries, Hilti Corporation automatically benefited .other trade pacts signed by the government of Liechtenstein are European Free Trade Association (EFTA) to facilitate economic trade among Iceland, Norway and Switzerland.
Hilti Corporation trades with Unirac; a leading provider of photovoltaic mounting solution in United States.This has enabled it to expand its market niche for solar panels in North America. Locally, Hilti sells its products to the government that it uses in construction projects. Further, the company maintains government’s construction products at an affordable price. Other trade partners include technical institutions that purchase products for their students to use in practical experiments. Hardware shops also purchase their stock from the company.
In the international market, Hilti sells its products to USA, Switzerland, Germany, Italy, New Zealand among 120 counties it has established sales offices. Major trade partners are Racing Point Industry Company Ltd, Bi- mirth Corporation, Sheh Fung Screws Corporation, Jau Yeou Industry Ltd and many others. The reason as to why the company trades with them is because of their expansive market niche, therefore, account for a large portion of the company’s revenue.
Does it make sense given its international strategy?
Hilti Corporation’s international strategy is to increase its revenue from international customers and increase its market base. With the company‘s decision to trade with the aforementioned trade partners, it will be able to realize its international strategic goals. Through trade pacts such as EFTA and EU, the company has been able to venture in over 120 countries worldwide. Further, its strategy to form mergers and acquisitions with companies such as Unirac and Jeptonik has increased its capital and, therefore, cushioned it against competitive forces.
Where does Hilti get its Capital?
Hilti Corporation is confined to the principles of business like any other business. Its main objective is to maximize profits and minimize on costs. The corporation needs capital to cushion it against external diseconomy of scale and funds for expansion. One of the key sources of capital is the revenue earned from its products. In addition, it earns from the charges made from maintaining those products for their customers. In order to get funds for expansion, The Corporation may receive grants from trade unions, for instance, European Free Trade Association (EFTA) where it can invest through Export process zones that offer free trade areas.
Another source of capital is through shares. The company offers its shares to the public, thus obtaining capital to expand its business. In addition, the management ploughs back a portion of its profit to cater for unforeseen expenses. The company also engages in investment outside the company. For instance, the management invested some of its capital in Jeptolink through mergers thus would incur profit inform of dividends. The company also participates in government bonds to earn interest.
Does Hilti experience any problem when sourcing for capital?
Like any other business, sourcing capital for expansion and to cater operational expenses has been a challenge. For instance currency fluctuations have hampered the company’s venture in the international market. The company uses Swiss franc as the national currency. With United States being its major trade partner, fluctuation of the dollar has affected sales revenue, which is an internal source of capital. Increase in interest rates from local banks has deterred company’s expansion program. Due to the global recession, the company has had moments of dismal performance thus attracting low dividend. This has reduced the value of shares, which is the main source of external capital. Another challenge is to assure individual lenders that the company will perform and would be able to repay the loan as agreed. This is because lenders are always uncertain of their investments.
The company also offers debentures to boost its working capital. Individuals tend to demand high interest rate which affects the company’s net profit.
How is this company organized? Does its organizational structure match its international strategy?
The corporation’s main strategy is to remain competitively relevant in the market by constructing and maintaining construction products. It has merged with other companies to expand its market. The company has been using its 3Cs strategy which include customer focus, maintain competitiveness and concentrating on its core markets. This strategy has enabled the corporation to counter the competitive wave. The company is categorized into two major categories that are product manufacture, sales and marketing and maintenance section. Each category is confined to its own work. For instance, sales and marketing section has established a direct-line contact with clients where they can be able to express their views and sentiments. In addition ,as part of its organizational strategy to venture in new markets, the company partners with other companies who produce similar or closely-related products to expand its customer base.
In a bid to re-establish itself, Hilti management reorganized its structure into three sections; corporate areas, marketing, finance and engineering sections. This strategy enhanced decision making in the company since1978. Another major organizational structure in its ambition to expand its business is through acquisition and merger. In 2001, the company acquired Ammann Holding AG, which specializes in rotating lasers and laser tools for constructing sewers. Further in 2003, Germany’s Jenoptik merged with Hilti to further reach another laser producing companies and expand client base.
The company’s organizational structure involves directors, senior management, employees and the clients. This enables communication easier since it can be communicated anyway; vertically upwards or downwards.
Does Hilti organizational structure match its international strategy?
Yes. The organizational structure exercised by the company’s management is the subject of the successes made by the company. For instance, establishment of corporate, finance and marketing sections has enhanced integrity and accountability in the company. In the marketing section, the company has established an online customer care platform which is responsible in responding to customer’s queries and compliments. Further, the online platform has enabled cost-effective way of marketing products in many countries simultaneously. Moreover, establishment of maintenance services has enabled the company to retain its customers because of its reliability and unprecedented services.
Are there differences in perceptions of ethics and social responsibility across the markets in which this company is active? If so, how does it manage those differences?
Hilti Company as a multinational corporation has to stick within the international code of ethics. International ethics requires that a company should observe the social status of any country or region it ventures in its market. The company has observed corporate social responsibility by employing people from the host country at an equal ratio of the whole workforce. Further, it has engaged with the community in cleaning activities, participating in fundraising activities and recycling of waste products. Different countries have different rules that guide in their business sectors. For instance, in its merger with Ammann holdings, Hilti gad to agree to in terms of the host company where an estimated equity of the new merger had to be retained by the parent company.
One of the ethical issues that challenge the company is harmonization of wages among the workforce. This is attributed to a mixture of workforce especially in merged companies. To overcome the challenge, the merger companies establish a common payment system that ensures that both countries rules on wages are not infringed. Another challenge is the communication barrier especially when it opens ventures in new markets. For instance, the language barrier between Germans and New Zealand resulted in the company to ensure marketing section was dominated by natives in the host country for easier communication with clients. Further, to ensure that the integrity is observed, all contacts made between the client and the employees are recorded for the purpose of accounting for any misconduct among the employees. This has helped the company overcome the challenges of social collisions.
Recommendations
I would suggest to the management to consider uphold online marketing t enable it penetrate the international market in a cost effective way. In addition, the management should consider evaluating its work force to a lower number below 25000 to reduce the wage cost and boost revenue. Further, the management should introduce maintenance solutions as an incentive to loyal customers. This will attract new customers and retain the existing customers. For instance, it could offer one year of maintenance services to customers.
References
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