Executive Summary
HG Ceramics Company is a company that produces building tiles and other ceramic products. The original company was built on a source of suitable clay and other resources and used to produce 4000Sq of plain white ceramic tiles. The company expanded and opened new factories and this tripled its production and diversified its product line. The company is located in a low labor cost, low material cost region and thus has a competitive advantage over its competitors. In 1999 the company experienced overall drop in product sales since the demand for basic plain wall tiles began to drop. The expectations of the company increased as more up market finished and glazes led to a drop in the sale of basic products.
In 2000 a strategy review led to more independence of the company from the retailer parent company. This led to the company management being encouraged in seeking other business and an introduction of new designs. Uncertainty increased in 2003 when the parent company decided to re tender its plain color all tiles. The company realized more problems in reducing the cost in the supply chain and development of new markets in order to retain the original business. The company management representative further said that the company needs to focus on the products and designs that satisfy the needs of the company and that differentiate the company from its competition. The strategic options that had to be implemented were as follows:
1. A loss in half of company sales and reducing the size of the company and its demand and concentrating on the basic tile products. The company engineers have a mastery of the new automated high volume tile making and firing technology which can help the company reduce the costs of the basic tile products and success in the low overhead competition. The dominance in technology would enable the company expand again.
2. A diversification strategy that would enable the company replaces the business as the demand for the plain wall tiles dropped. New products for production were suggested such as more up market wall tiles, floor tiles and ceramic products such as toilets, bathtubs, and shower trays. The intention was to produce products that would fit to the rising standards of the people both in the local and export regions. However, the local market has a standard that is rising such that the company’s products are also affordable to the low cost economy in most of the domestic homes.
3. HG Company also decided to mix the current activities in its operations in a bid to find the alternative outside clients for the new wall tiles. This strategy has the advantage of capitalizing on the company’s strengths as the management of the company argued out. Another strategy would dissipate the pool of market and manufacturing expertise in the company’s operation in wall tiles.
The implementation of the new strategy had numerous advantages as well as problems to the different aspects of the company management of the supply chain and manufacturing. In 2003, the company therefore had to change in accordance to the new policy since the sales and profits also increased.
