1. U n i v e r s i t y o f E x e t e r Strategy (BEMM119) Group Report Drew Reynard Xin Wang Xiaoyao Zhu Archit Garg Janevisa Pattarapornpisit Siyu Chen Group 28 Abstract This report is an executive summary of a case study assignment looking into the current and future strategies of UK-based engineered textiles manufacturer AmSafe. For any further detail required please see the wiki page for all of the collated information and references used. AmSafeBridport is the worlds leading provider of safety restraint products and is a dominant force in three separate markets, the markets for cargo, airframes and as of recently the market for Tarian (an RPG defence net aimed at military markets). AmSafe have recently been acquired by American private-equity firm Transdigm and the new owners have asked AmSafe to focus on three key areas; cost reductions, price increases and product development. Therefore these must be the aims for any future strategy ensuring AmSafe maintain their position as global market leader. These strategies must balance financial objectives with strategic objectives, for AmSafe how these goals can be measured can be seen in the balanced scorecard in appendix 1.
2. Scene-Setting and Environmental/Internal Analysis External Analysis We started our analysis by looking at AmSafes external environment. Figure 1 shows the various impacting factors for AmSafe. These signify it is operating in a fast-moving environment. These dynamics help us to look forward in regards to what drivers will change the industry in the near future. The wide variety of different drivers also indicates the difficulty AmSafe faces in moulding a coherent strategy going forward that embraces market uncertainties. Figure 1: Amsafe forces and drivers Taking these drivers, we concluded several basic trends. Firstly, there is an increasing demand for reduced-weight products. Secondly, there is increasing concern about the risk cargo transporting brings. Also, the aviation industry is embracing a deregulation trend leading to growth in emerging marketsbut also increasing costs. Based on the analysis, we built four scenarios centredon two key uncertainties that are economic condition and the potential of war or terrorist attack (see figure 2). The scope of the scenario is to forecast the effects to the future in 2019, at the global level and covering the industry of commercial aviation and defence business.
3. Figure 2: AmSafe Scenario Planning Struggle to maintain the position results in an increased demand in the defence industry but a decreased demand in aviation industry. In this situation, AmSafe could continue its innovation strategy to develop more products in defence industry and change its product portfolio. Struggle to survive sees both commercial aviation and defence industry suffer from low demand, making AmSafe struggle to survive. In this case, AmSafe could try to increase profit margin by cutting down costs and increase efficiency.Aviation booming describes a future with demand increases in aviation industry due to the economy booming while defence industry doesnt change much. Amsafe can best benefit it by carrying out a best-cost strategy, and expanding their markets. Both market booming sees both industries striving AmSafe can take advantage of this by carrying out innovation, diversification, market penetration and market development. However, this situation has very low possibility of happening, as the economy tends to contract when war or terrorist attacks occurs.
4. Figure 3: Industry Life Cycles Key: Blue = Tarian (defence) Red = Airframe Green = Cargo AmSafes three markets are at different stages in the industry life-cycle (shown above), this suggests that since the defence sector is in the growth stage that future strategies should be focussed on filling this expanding demand, be it through new product innovation or blue ocean strategies to satisfy new demands. Internal analysis Resources and Capabilities Appendix 2 identifies the key resources of AmSafe. In isolation resources do not provide a company with a competitive advantage. Figure 4 looks at the capabilities of AmSafe and puts them into hierarchical order according to the scope of knowledge that they integrate. Figure 4: AmSafe Hierarchical Capabilities
5. This table shows AmSafe's hierarchical capabilities by scope of knowledge. Considering the dynamic and changeable environment Amsafe operates in, its not enough to only analyse the capability in a predictable and stable environment. Therefore, consideration is given to dynamic capabilities. Figure 5 identifies Amsafes dynamic capabilities that build or grow within the firm and cannot be purchased. Figure 5: AmSafes Dynamic Capabilities AmSafesforward-thinking strategies have led them to a dynamic capability rich position. They have strong dynamic capabilities in the management process that helps them to adapt to uncertainties and unexpected events A traditional VRIN framework is used to analyse the resources and capabilities of Amsafe. Figure 6: AmSafe VRIN Framework
6. The chart illustrates clearly that AmSafe is strong in the innovation design, capabilities and intellectual assets from traditional analysis. They can provide developed products that fit for the advanced aircraft, their advanced lightweight cargo pallets are the industry leading products. Because of the good quality and timely innovation, they also acquired a good reputation and stable customer. However, due to the fast moving competition AmSafe needs to shorten the time from idea to product in order to stay ahead of competitors. Another tool, the value chain, is introduced in appendix 3.The main channels through which AmSafe adds value are its expertise on the manufacturing and product development side. Its vast experience and knowledge of the market help it to develop the very best products that outcompete rivals through sheer quality. This can be seen through its development and rapid success of its' latest product Tarian. AmSafe's ability to further its current products whilst moving into new markets not only generate profit but also adds value to customers as products were not previously available in some of these markets. This value added arises through AmSafe working closely with current and prospective customers to develop better products and solve any problems they have. Combining all of the above strategies gives us the TOWS matrix below which shows how AmSafes environment influences their strategy.
7. Figure 7: TOWS analysis for AmSafe TOWS Strengths 1.Product innovation capabilities 2.Skilled engineers 3.Strong brand and reputation 4.Proven capabilities in improving production processes 5.Good relationship with suppliers+distributors 6.Good quality products Weaknesses 1.Centralised management structure (slow reaction) 2.Product to market lag time Opportunities 1.The growth of aviation industry in emerging countries 2.Customer demand for reduced- weight products increasing 3.Deregulation of aviation industry OS 1.Market development (emerging markets, new markets) 2.Blue ocean strategy OT 1.Use large-scale production units to exploit economies of scale 2.Reduce lag time by increasing innovation investment Threats 1.The cyclical nature of commercial aviation industry 2.Defence sector regulation 3.Increasing labour costs (China) 4.Credit risk and customer default 5.(low-cost)Competitors emerging particularly in emerging markets 6.Foreign exchange movement TS 1.Innovation strategy - product development strategy 2.Arbitrage - global supply chain 3.Best-cost strategy - maintain quality and innovation when control the cost WT 1.Set up a financial department to deal with foreign exchange movement 2.Decentralise to give subsidiaries more autonomy to operate Key Strategies Identified Business level strategy AmSafe has recently pursued several different business level strategies as illustrated below: Best-Cost Provider AmSafe target 3% year on year cost reductions. This cost-minimising strategy is combined with a product differentiation strategy with the aim of maximising customer satisfaction. AmSafe has done this by cutting costs in its broad market (commercial aviation) in order to appeal to a niche market in the form of its Tarian product (Thompson et al 2012, p167). Maintaining this prof itable middle-ground is vital for future strategy implementation. Blue Ocean strategy - AmSafe has also sought to create uncontested markets through investment in its product development and R&D. An example of this is its' thriving Tarian business which now represents 20% of AmSafe's profits even though it was only established several years ago. Although this market is now contested through competitors such as Qinetiq, AmSafe still exploits a first mover advantage and this side of the business is highly profitable and expanding quickly.
8. Figure 8Tarian Strategy Canvas This Strategy canvas visually represents the areas of competition that AmSafe is outperforming its' competitors such as Qinetiq in and those where it is being outcompeted. It can clearly be seen that this represents a blue ocean strategy, as AmSafe is able to offer far more than competitors especially in terms of how the product is reusable and lightweight. AmSafes international strategy- Another of AmSafe's recent strategies has been to expand the outreach of its' operations into America, Sri Lanka, China to complement its corporate headquarters in Bridport. This strategy helps to locate AmSafe closer to both its' customers and its' suppliers (e.g. many of AmSafe's suppliers are located close to its China base). This strategy has the benefit of AmSafe being able maintain and establish relationships more easily both with suppliers and customers. By being located in China this also gives AmSafe the ability to source new suppliers and better manage their supply chain, as pro