TITLE PAGE

Table of content 1.1 Context ......................................................................................................................................... 4

1.2 Research Problem ........................................................................................................................ 4

1.3 Research Goal ............................................................................................................................... 6

1.4 Research Design ........................................................................................................................... 6

1.5 The Structure of the Report ......................................................................................................... 7

2. Literature Review ............................................................................................................................... 8

2.1 Introduction .................................................................................................................................. 8

2.2 Operational Activities .................................................................................................................. 8

2.3 Investment .................................................................................................................................... 9

2.4 Marketing and Sales ................................................................................................................... 10

2.5 Other Literature.......................................................................................................................... 13

2.6 Relevance Tree ........................................................................................................................... 15

Chapter 3 Methodology ....................................................................................................................... 16

3.1 Introduction ................................................................................................................................ 16

3.2 Research Questions .................................................................................................................... 16

3.3 Credibility of the Research ......................................................................................................... 20

3.4 Planning and Execution of the Research ................................................................................... 21

3.5 Summary ..................................................................................................................................... 22

Chapter 4 SIN and its Internal & External Environment ..................................................................... 23

4.1 Introduction ................................................................................................................................ 23

4.2 Competition analysis .................................................................................................................. 23

4.2.1 Wheelabrator ...................................................................................................................... 24

4.2.2 Metal Improvement Company ........................................................................................... 27

4.2.3 CTB Holland BV .................................................................................................................... 31

4.3 Resource-based view ................................................................................................................. 33

4.2 Porter´s Five Forces Model ........................................................................................................ 37

4.3 STEP-Analysis .............................................................................................................................. 49

4.4 SWOT-Analysis ........................................................................................................................... 52

4.4.1 Strengths .............................................................................................................................. 53

4.4.2 Weaknesses ......................................................................................................................... 54

4.4.3 Opportunities ...................................................................................................................... 55

4.4.4 Threats ................................................................................................................................. 58

4.4.5 Confrontation Matrix .......................................................................................................... 58

4.4.6 Summary .............................................................................................................................. 61

5. Financial Analysis of the JSP Division .............................................................................................. 62

5.1 Break-Even Analysis ................................................................................................................... 62

5.2 Net-Present Value (NPV) ............................................................................................................ 69

Chapter 6 Conclusions .......................................................................................................................... 70

Chapter 7 Recommendations and Strategic Implementation ............................................................ 70

Chapter 8 Appendices .......................................................................................................................... 80

1. Introduction 1.1 Context Straaltechniek International B.V(SIN) is set up in 1982 as a daughter company of Straalbeheer B.V. and is established in Oosterhout, The Netherlands. SIN is not the only daughter company; the group consists out of three more companies which are established in Germany, Belgium and Norway and two joint ventures in Romania and Slovenia. These companies are all part of the Straaltechniek International group which have employed 150 people in total, whereof 24 are employed at SIN. They are specialized in the manufacturing and design of surface treatment machinery. The purpose of such equipment is, in general, to enhance the quality and to increase the lifetime of the processed components. The expertise of SIN is reflected in their customer base, huge companies such as Rolls Royce, Hyundai, Stork Fokker, KLM and many more familiar companies have made use of the knowledge and experience of the company. One of the most popular machinery that SIN offers is shot peen machinery. The shot peen technology significantly increases the life time of processed components without increasing the weight. Examples of components that are often being shot peened are for example, landing gears of airplanes and drive shafts of cars. It is of great importance that these components are able to resist the stress that they have to face to avoid critical accidents. However, shot peen machinery is an expensive asset and it involves a considerable amount of training, experience and knowledge in order to execute the process. Next to that, companies need specific certificates and approvals before they are allowed to make use of the technology. To avoid this training, the approvals and the purchase of this machinery, SIN wants to offer “job shot peening” (JSP); a service where SIN offers to shot peen components for clients. To realize this, the company already built shot peen equipment which is located at the working place of their office. The next step is to open a separate division which is mainly focused on JSP services. 1.2 Research Problem The main problem of SIN is the uncertainty of the economic feasibility of the new division. The division will be focused on a niche market; “companies within Europe who are not willing, not able or find it too risky to invest in shot peen machinery, instead, they are willing to hire a specialized firm to execute the process on the desired components, materials or products”. To measure the economic feasibility it is essential to research to what extend competitors offer their services, what types of jobs are they assigned to and what types of clients make use of this service. With this knowledge it can be determined what the market potential is and to what extend the new division should offer JSP services in order to become a full competitor. Another important factor are financial analyses. Key is to have financial data such as; the turn-over rates of the competition, expected labor costs, average production costs per batch, how the investment will be funded, its interest rate, costs of assets, transportation costs, process costs and other overhead costs. Possessing this data will give a clear overview of the expected costs in comparison with the expected sales. It creates the possibility to apply a several financial analysis which will be part of the financial translation of the feasibility report. The feasibility will be measured by applying financial analyses based on relevant financial data of SIN, by analyzing the external and internal environment of SIN and by making a sales prediction in the form of scenario’s. (REFER FIHBONE) views the influencing factors on the economic feasibility of the establishment of a JSP division.

1.3 Research Goal The overall goal of the proposed research is to determine the economic feasibility of offering JSP services. The research goal can be further refined in the following sub-objectives:

To estimate the operational costs, the investment needed and the potential of opening a JSP division within SIN.

To predict the potential sales of the shot peen division of SIN.

To establish which assets are needed, its purchase and installation cost in order to estimate the needed amount of investment and have a basis for the depreciation cost.

To identify potential threats and opportunities for the job shot peen division of SIN. For a further detailed view regarding the research objectives I would like to refer to (REFER FISHBONE) 1.4 Research Design The research goal, its (sub) objectives and the presented research questions indicate that multiple sources are needed in order to collect evidence. Therefore a case study is the most likely research strategy (Yin, Case Study Research: Design and Method 3rd edition, 2003). This case study is a qualitative research substantiated by in-depth interviews, interviews, desk-research, field research, company documents and personal observations. In order to pursue the research goal, relevant research questions have been designed. The research questions are structured according to the structure of (REFER FISHBONE). Marketing and Sales, which were shown as two separate subjects, will be discussed as one subject from this moment on. Subject Research Questions

Investment

What assets are needed and what are the expected costs involved (including depreciation)?

What will be the method of funding of the assets needed to realize a job shot peen division?

Marketing & Sales

What is the market size and the market structure of the job shot peen market?

What are the strengths, weaknesses, opportunities and threats of je job shot peen division?

What is the level of competitive force of the job shot peen division.

What sociological, technological, economic and political influences can harm or benefit the job shot peen division or the establishment of the job shot peen division?

What is the estimated average sales, in euro, per production batch regarding the job shot peen division?

What is the level of competition and to what extend do they offer job shot peen services?

Operational Activities

What are the expected labor cost and wage tariffs, variation in wage tariffs and occupancy rates?

What are the expected process cost taking into consideration the expected maintenance costs, material costs and transport costs?

What are the expected overhead costs, based on expected cost of sales and marketing and other indirect cost.

1.5 The Structure of the Report The report is structured according to the process of the conducted research. In chapter 1 the research problem is explained and a strategy has been designed in order to research the issued problem. Chapter 2 explains the literature applied to this research. A critical selection has been made between different interpretations of the literature and theories applied to this inquiry. In chapter 3 the methodology of the research is discussed. It gives a clear overview what and how is researched in order measure the economic feasibility of the establishment of a JSP division. In chapter 4 and 5 research findings are processed in internal analyses, external analyses and financial analyses. The results of the analyses of chapter 4 and 5 are processed in chapter 6: Conclusion. Chapter 7 is called “recommendation and implementation”, based on the conclusion recommendations are formed. Each recommendation is followed by an advisement provided with ideas of implementation. Lastly, evidence of the research can be found in the appendices of this report. When relevant, references to the appendices are processed in the report. Appendices will not remain limited to evidence, also tables, figures and other research findings, which appeared to be irrelevant to this research, are enclosed.

Chapter 2. Literature Review 2.1 Introduction This chapter reflects the purpose of the literature applied to this research. The goal of this research is to measure the economic feasibility of JSP services. Economic feasibility refers to an acceptable rate of return generated by a project. The rate of return is acceptable when it covers the costs of capital of the particular project taking Net Present Value (NPV) into consideration (El-Sharkawy, 2005). This chapter is structured based on the diagram in Fout! Verwijzingsbron niet gevonden.(REFER FISHBONE). Some theories are substantiated by several references, a critical selection have been made in order to filter the most relevant interpretation of the particular theory, taking specific characteristics of SIN into consideration. 2.2 Operational Activities In order to measure the economic feasibility of shot peen services it is important to gain clear insight in what costs can be expected. To assure reliability, cost estimations are based on the costs of already operating activities of the JSP division. The research questions of this paragraph are designed to identify labor costs, overhead costs and process costs and are based on the structure of the diagram in Fout! Verwijzingsbron niet gevonden..

What are the expected labor cost and wage tariffs, variation in wage tariffs and occupancy rates? The required data in order to answer this research question has been acquired through an in-depth interview and an interview with the financial manager and the deputy director of SIN (REFER). All necessary data regarding wages is acquired and applied in order to conduct several break-even analyses and sales predictions. The height of the wage derives from www.loonwijzer.nl. It is a website which can be used as a tool in order to get an indication of the wage of the particular profession. Occupancy rates have been acquired by studying sales data of the JSP Division. All data from the years 2010, 2011 and 2012 have been studied and evaluated in order to determine the current and the required occupancy rates in order to break-even. The risk of this source is the dependence on the commitment of SIN.

What are the expected overhead costs, based on expected cost of sales and marketing and other indirect cost? The required data in order to answer this research question has been acquired through an in-depth interview and an interview with the financial manager and the deputy director of SIN (REFER). All the required data in order to calculate the costs have been distributed. The costs have been determined and are applied to the break-even analysis and the sales forecast. The risk of this source is the dependence on the commitment of SIN.

What are the expected process cost taking into consideration the expected maintenance costs, material costs and transport costs? The required data in order to answer this research question has been acquired through in-depth interviews and interviews with the financial manager and the deputy director of SIN and by studying financial documents of the company (REFER). Maintenance and material costs have been identified. Transportation costs are for the client. The risk of this source is the dependence on the commitment of SIN.

2.3 Investment In order to measure the economic feasibility of shot peen services, it is essential to have a broad view of the needed amount of investment. This data is essential to be able to compute a break-even analysis and to process data in other financial frameworks such as balance sheets. To identify interest costs, it is key to know whether the funding is based on a bank loan or that the financial injection comes from the company itself. Financial data will be retrieved from company documents of the JSP division of SIN. The research questions stated in this paragraph are designed to determine which assets are needed, to determine the amount that needs to be invested and how the assets are being funded. The research questions are based on the structure of Fout! Verwijzingsbron niet gevonden..

What assets are needed and what are the expected costs involved (including depreciation)? The data required in order to answer this research question is retrieved by studying financial documents of SIN and through an interview with the financial manager and deputy director of SIN. All assets needed, including its costs are identified. Through an in-depth interview with the financial manager of SIN it can be determined that straight-line depreciation method is applied at SIN. All assets are depreciated in 5 years. With the straight-line depreciation method, every period of the estimated useful life of the asset an equal portion of its cost will be depreciated (J. R. Williams, S. F. Haka en S. M. Bettner). The formula applied in order to compute the depreciable amount is viewed below:

Cost of asset – scrap value / estimated useful life = depreciable amount.

The risk of this source is the dependence on the commitment of SIN.

What will be the method of funding of the assets needed to realize a job shot peen division? Based on an interview with the deputy director of SIN and several in-depth interviews among key-staff of SIN (REFER) the method of funding has been determined. Also all additional information, such as interest, regarding the acquisition of the assets have been acquired. The risk of this source is the dependence on the commitment of SIN.

2.4 Marketing and Sales In Fout! Verwijzingsbron niet gevonden., marketing and sales are illustrated as two separate factors. Due to the relation between marketing activities and sales activities, these two factors will be discussed as combined in the rest of this thesis. In order to measure the feasibility of shot peen services, reliable sales predictions need to be made. Several marketing theories will be applied in order to get a broad view of potential influences on future sales. The research questions of this paragraph are designed in order to estimate potential sales, to measure the competitive force of the JSP division, to identify potential external threats and opportunities for the JSP division and to analyze the SWOT factors of SIN with regards to the JSP division. All research questions are based on the structure of Fout! Verwijzingsbron niet gevonden..

What is the level of competition and to what extend do they offer job shot peen services? A competition analysis indicates the level of competition and to what extend JSP services are offered. The required data in order to answer this research question is gained through desk-research, interviews and an in-depth interview with the former division manager of the biggest competitor of the JSP Division (Maes). The analysis consist out of a full evaluation of the direct competition and its capabilities regarding JSP activities. All factors that contribute to the success of the competition are recorded. The analysis contributes to the SWOT-Analysis and the Resource-Based View. The competition analysis based on explanations of the book; Business and Competitive Analysis (Fleisher en Bensoussan) due to that it provides more detailed information than other literature.

How can it be determined whether the JSP Division of SIN is in possession of a competitive advantage? The data required in order to answer this research question derives from a Resource-Based View analysis. The resource based view is basically based on the theory of (Henry), however some influences of an article of the Ritsumeikan University of can be found back in the thesis. This Article is written by Tokuda Akio and will be referred as (Akio).The literature from Akio has been applied due to that it is a clear example of how to critically analyze the RBV and how to bring it into practice. There are similar types of companies that exploit equal types of resources but differ from performing. According to (Henry) this is caused by the extent to which resources are used in a company. The resources of SIN are identified and compared with the resources of competition. Based on this comparison it is determined whether SIN possess a competitive advantage or not Competitive advantage “To gain competitive advantage over its rivals, a company must either perform activities at lower cost or perform them in a way that leads to differentiation and a premium price” (Porter & Millar, 1985). By analyzing competition there will be looked for the possibility to create competitive advantage for the job shot peen division of SIN. The risk of this theory is that, due to particular factors, SIN is not able to create a competitive advantage over its competition. The literature of Porter and Millar have been applied to this thesis in order not to deviate from the basics of the theory to get a clear understanding of the theory. Further evaluation of the theory can always be an option in future developments of the JSP Division. The limitation of the RBV is that the comparison with competition is mainly based on desk-research and an in-depth interview of the former division manager of MIC (Maes).

What is the level of competitive force of the job shot peen division based on the five forces of Michael Porter? Michael E. Porters well-known framework, known as the five forces model, helps managers to analyze the competitive forces in the industry to identify the opportunities and threats (Hill & Jones, 2009). The framework consists out of five forces:

The risk of entry by potential competitors

The intensity of rivalry among established companies within an industry

The bargaining power of buyers

The bargaining power of suppliers

The closeness of substitutes to an industry’s product

These subjects are used to measure the competitive force of the JSP Division. These factors will be used to identify potential threats and opportunities. A strong competitive force is identified as a threat to the JSP Division. A weak competitive force is identified as an opportunity for the division. The results of this analysis is used in order to conduct a SWOT-Analysis. The literature of Hill & Jones has been applied due to that the book “Strategic management: An integrated approach” is provided with a very detailed and developed explanation of the literature in comparison with other theories. Other literature were more provided with a broad understanding of the purpose of the theory. The limitation of applying this analysis is that (1) the outcome is variable due to that market conditions change and (2) additional analyses should be made in order to get a reliable view. In order to counter the 2nd limitation, more analyses are applied in order to get a dynamic view of the market.

What sociological, technological, economic and political influences can harm or benefit the job shot peen division or the establishment of the job shot peen division? In order to gather the required data to answer this question a STEP-Analysis has been applied. STEP stands for Sociological, Technological, Economic and Political. The outcome of this analysis is an overview of elements of the external environment related to the organizations and its immediate surroundings (Brassington & Pettitt, 2006). The results are used in order to conduct a SWOT-Analysis at the end of Chapter 4: SIN and its Internal & External Environment. Data has been acquired by desk-research and in-depth interviews (REFER). Instead of a STEP-Analysis, a PESTLE or a STEEPL-Analysis could be applied. The additional letters emphasizes “Environmental and Legislative”. According to research (refer in-DEPTH) there are no environmental factors involved in the shot peen technology. Furthermore legislative decisions are often greatly influenced by political decisions. Therefore a STEP-Analysis is applied instead of a PESTLE or a STEEPLE-Analysis. The limitations of this analysis, is that more data is required in order to achieve the research goal. In order to counter this limitation more analyses are conducted in order to get a broad

and dynamic view of the market.

What are the strengths, weaknesses, opportunities and threats of je job shot peen division? According to (Applegate & Johnson, 2007), a SWOT-Analysis is suited for strategic planning, a competition evaluation, product development, business development and reports such as market and communication plans. According to (Brennan, 2009), a more detailed analysis is almost always required in order to reach the potential of the SWOT. Therefore all the results of previous analyses are processed in the SWOT-Analysis. The SWOT-Analysis provides SIN with a projection of all their Strengths, Weaknesses, Opportunity and Threats. The analysis is evaluated and processed in a confrontation matrix in order to gain strategic insights for future developments of the JSP Division. Economic feasibility of the JSP is partly determined based on the outcomes of the (non-financial) analyses of chapter 4. The required data has been gathered through in-depth interviews, interviews, desk research, preliminary research and personal observations. Due to the relatively small population (9 respondents) (Refer) the interviews are conducted in the form of a questionnaire; all participants are asked the same set of questions whereof the sequence is predetermined (deVaus, 2002). The SWOT-Analysis is based on the literature of (Applegate en Johnson) and (Brennan). This combination has been applied due to that it is emphasized by Brennan that a SWOT needs to be substantiated by findings of other analysis. Applegate and Johnson confirm that a SWOT is suited for strategic planning, competition evaluation, business development, etc.. Their interpretations correspond with the fishbone diagram (REFER FISHI) which is the fundament of this research. herefore more analyses are applied in order to provide the report with a very detailed SWOT, which gives a non-financial view of the feasibility of the establishment of the JSP Division. Limitation of this research is that a SWOT-Analysis needs secondary analysis in order to reach the full potential. In order to counter this limitation, the SWOT is based on a (1) Competition Analysis, a Resource-Based View, the Five Forces Model and a STEP-Analysis.

What is the estimated average sales, in euros, per production batch regarding the job shot peen division? The required data in order to answer this research question has been acquired through a study on the existing sales data of the JSP Division. This essential data has been applied in order to conduct a break-even analysis and in order to provide SIN with a sales forecast. The limitation of this source is that, the price per “job” is based on the average price per job. It is hard to precisely calculate the average price per job due to that the quantity and prices of orders very heavily from each other. Another risk is the dependence on the commitment of SIN.

2.5 Main Research Question

What is the economic feasibility of rendering JSP services? In order to answer this question all analyses in chapter 4, which are previously described, are conducted. In order to take financial matters into consideration a Break-Even Analysis and a Sales Forecast have been applied to this report. The forecast and the analysis are explained below. Break-even analysis The break-even point refers to the point where the total revenue equals the total costs (Williams J. R., Haka, Bettner, & Carcello, Break even point, 2009). The break-even analysis has been conducted in order to indicate what minimum turnover is needed to cover the total costs of the processes. The break-even analysis has also been processed according to each type of scenario in the sales forecast. The required data in order to answer this research question has been acquired by studying company documents and interviews. The sales data of the JSP Division has been studied and the most of the financial data derives from interviews with the financial manager and the deputy director of SIN (REFER). The limitations of this literature is that some costs are based on estimations or an average and some are real costs. Another limitation is the dependence on commitment of SIN. Sales Forecast The sales forecast consists out of three different scenarios from a pessimistic, a realistic and an optimistic view. All scenarios are based on data gathered through interviews, desk research and observation of company documents. These data ensures a certain level of reliability of the forecast. In order to identify the required factors to execute the sales forecast, a fishbone diagram have been made (REFER FISHI). The fishbone can be interpreted as an evaluation of the research problem which indicates all factors involved in order to reach the research goal. Knowledge about forecasting has been gained through the book “Sales Forecasting: A New Approach” (Wallace en Stahl). Basics of forecasting are briefly explained in this book. Limitation of this literature is the accuracy of a forecast. Predicting the future always involves a particular degree of uncertainty. Another limitation is the dependence of commitment of SIN. The choice of literature in order to answer the main research question has been made based on interviews and conversations with JSP Manager, Mr M. Wildhagen. He clearly stated that reaching the break-even point is one of his desires. Furthermore, the directing manager of SIN mentioned that he required a 40% of contribution margin per job. Therefore a break-even analysis has been applied, supported by a sales forecast. Another possible theory that could be applied in order to measure economic feasibility was the Net-Present Value (NPV) theory. Due to that this investment contributes to R&D, additional services and knowledge distribution, money is not the only value involved. The NPV theory involves only the economic value and does not identify the symbolic value. Therefore a calculation of the NPV is considered inaccurate and irrelevant to the research goal. A break-even analysis is considered more accurate due to that it can be substantiated with financial data provided by SIN.

2.6 Other Literature This paragraph consist out of all literature which is not directly related to the stated research questions. The literature in this paragraph is essential to the main goal of this research or the structure of the inquiry and therefore considered as equally important as previous discussed literature. The main goal of this research is to measure feasibility of shot peen services. The theories applied origin from marketing, research and financial backgrounds and are based on the structure of Fout! Verwijzingsbron niet gevonden..

Case study Multiple sources of evidence need to be researched to accomplish the desired goal of the particular inquiry (Yin, 2003). To measure economic feasibility different sources of data need to be studied. Therefore qualitative research, in the form of a case study, will be applied to this inquiry to draw conclusions as accurate as possible. The disadvantages of a case study are (1) that the researcher might have a biased view on the subject which influences the findings and conclusions, (2) that case studies are, in general, not suitable for generalization and (3) it is time consuming and a huge quantity of data will be generated which is hard to summarize (Wimmer & Dominick, 2006). Relevance tree (Saunders, Lewis, & Thornhill, 2009) A model which indicates the relevant subjects that need to be researched in order to achieve the goal of the research. The disadvantage of the model is that it is hard to understand for the general reader, the purpose of the relevance tree is to give the researcher an relevant overview of the factors that need to be researched in order to achieve the research goal. Fishbone diagram A fishbone diagram is a form of brainstorming where ideas are organized in subjects in the bones of a fish, see Fout! Verwijzingsbron niet gevonden.. It provides a more logical and visual way of organizing data (Webb, 2006). The simplicity of the fishbone diagram is also its weakness, the true nature of problems and causes can be difficult to represent in complex situations (Watkins, West-Meiers, & Visser, 2012).

2.6 Relevance Tree A relevance tree (Saunders, Lewis, & Thornhill, 2009) is stated below Fout! Verwijzingsbron niet gevonden.. All factors discussed are based on the structure of the

cause and effect diagram in Fout! Verwijzingsbron niet gevonden..

Chapter 3 Methodology

3.1 Introduction Chapter 3 argues the methodology applied to this research. All research questions stated in chapter one are reviewed and linked to the unit of analysis. Also data collection instruments have been linked to the particular research questions. Furthermore, the research strategy and data collection methods are being discussed and defined. 3.2 Research Questions To give proper insight in how the research questions will be answered, they will be linked to the unit of analysis. Also the particular data collection instruments, which will be used for answering the particular research question, will be linked to the questions. The unit of analysis is the economic feasibility of shot peen services and is stated in (REFER CHAPTER 1). The research questions will be discussed in the boxes shown below. What will be the method of funding of the assets needed to realize a JSP division?

In order to measure economic feasibility of JSP services it is a necessity to put all costs in sequence. Whether the loan is granted by a bank or is a private investment, it will always cost money. Interest needs to be paid to the bank or incoming interest from the bank will be lost. Both types of interest rates can be considered as a cost and is essential in computing a break-even point. Secondly, data will be used in order to compute the NPV of the investment to identify whether the investment is lucrative or not. The data has been gathered through in-depth interviews. What assets are needed and what are the expected costs involved (including depreciation)?

In order to measure economic feasibility of JSP services it is essential to possess financial knowledge regarding the investment made. The costs of investment; costs of equipment, interest rates, costs of the building, depreciation etc., will be used in order to compute a break-even point. Secondly, the data will be used in order to compute the “Net-Present Value” (NPV) of the investment to identify whether the investment is lucrative or not. The data will be gathered through in-depth interviews and company documents provided by SIN. What is the estimated market size and the market structure of the JSP market?

The market size is required in order to measure whether the market is already utilized or not, or at least, how far the process of utilization momentarily is. The market size also gives indication in the margin of error of the preliminary research conducted by SIN. The structure of the market will be data which indicates what types of competition can be expected. It might be so that adaptions should be made in order to keep up with competition, this might also involve extra costs which should be taken into consideration when conducting a feasibility study.

What is the level of competitive force of the JSP division?

In order to measure economic feasibility it is essential to have a clear view of the competitive force of the industry. In order to measure the level of competitive force, the five forces model of Porter will be applied. The result of the model will be an evaluation of each individual force. Each evaluation is summarized. The competitive force is used in order to identify SWOT factors of SIN. The conclusions and recommendations of this inquiry are influenced by the competitive force of the industry. The results indicate the industrial pros and cons for SIN as a company which can be used as a tool to measure economic feasibility. The required data will be gathered through personal observations, in-depth interviews and interviews. What is the level of competition and to what extend do they offer job shot peen services?

In order to measure the economic feasibility of JSP services, the competition will be identified and analyzed. The analysis should indicate to what extent competition penetrates the market with regards to JSP activities. The analysis will consist out of a written analysis and will be processed in a table. A competition analysis is indirectly linked to the economic feasibility of JSP activities due to that activities of competition may lead to extra costs. Next to that it will indicate to what extent the market is utilized. The acquired data of this analysis is used in order to identify SWOT factors of the JSP of SIN. The required data to answer this research question will be gathered through observations, desk-research, interviews and an in-depth interview with the former division manager of one of the competitors. What sociological, technological, economic and political influences can harm or benefit the job shot peen division or the establishment of the job shot peen division?

In order to measure the economic feasibility of JSP services, external factors which has the potential to harm or benefit the JSP division are taken into consideration by applying a STEP-analysis. The word STEP refers to Sociological, Technological, Economic and Political. This analysis is conducted in order to identify which factors contain potential harms and treats and will be processed in a matrix. The acquired data of this analysis is used in order to identify SWOT factors of the JSP of SIN. The results of the STEP analysis will be used in order to estimate potential sales and in order to measure the risk of the investment. What are the strengths, weaknesses, opportunities and threats of the JSP division?

In order to gain a dynamic view of the market, SIN and of potential external influencers, a SWOT analysis will be conducted. The SWOT analysis will come forth out of a resource-based view, the five forces model, a STEP-Analysis, a competition analysis and will be processed in a confrontation matrix which may lead to strategic insights. The SWOT analysis is essential to the unit of analysis due to that the results indicates the potential of the JSP division. The economic feasibility does not only depend on the market but also on the capabilities of SIN itself. The required data will be gathered through in-depth interviews, interviews and personal observations. What is the estimated average sales, in euro, per production batch regarding the job shot peen division?

In order to measure the economic feasibility of JSP services a reliable sales estimation is required. To assure the most reliable and valid estimation, it will be based on the existing sales history of the JSP division. This data will, annually, be calculated to an average and processed in the sales estimation. The sales history is also a requirement in order to narrow down the total costs of SIN to the JSP division of SIN. These costs are needed in order to compute a break-even point and other estimations. The required data will be required through observations in company documents and interviews.

What are the expected labor cost and wage tariffs, variation in wage tariffs and occupancy rates?

To measure economic feasibility of JSP services it is essential to have a reliable estimation of the expected process costs. In order to make an estimation, as regards economic feasibility, it is essential to make an Break-even analysis. In order to execute this analysis a clear picture of the fixed costs and the variable costs is required. The Break-even analysis indicates what quantity of money is required in order to cover total costs. Secondly, a sound sales prediction needs to be assessed. This sales prediction will be compared with the total estimated cost of the JSP division. In combination with the Break-even analysis and other analyses, it will be determined whether the establishment of a JSP division is economic feasible or not. The required data has been gathered through interviews and through observations of documents provided by SIN. What are the expected process cost taking into consideration the expected maintenance costs, material costs and transport costs?

To measure economic feasibility of JSP services it is essential to have a reliable estimation of the expected process costs. In order to make an estimation, as regards economic feasibility, it is essential to make an Break-even analysis. In order to execute this analysis a clear picture of the fixed costs and the variable costs is required. The Break-even analysis indicates what quantity of money is required in order to cover total costs. Secondly, a sound sales prediction needs to be assessed. This sales prediction will be compared with the total estimated cost of the JSP division. In combination with the Break-even analysis and other analyses, it will be determined whether the establishment of a JSP division is economic feasible or not. The data will be gathered trough in-depth interviews and through company documents provided by SIN. What are the expected overhead costs, based on expected cost of sales and marketing and other indirect cost?

To measure economic feasibility of JSP services it is essential to have a reliable estimation of the expected process costs. In order to make an estimation, as regards economic feasibility, it is essential to make an Break-even analysis. In order to execute this analysis a clear picture of the fixed costs and the variable costs is required. The Break-even analysis indicates what quantity of money is required in order to cover total costs. Secondly, a sound sales prediction needs to be assessed. This sales prediction will be compared with the total estimated cost of the JSP division. In combination with the Break-even analysis and other analyses, it will be determined whether the establishment of a JSP division is economic feasible or not. The data will be gathered trough in-depth interviews and through company documents provided by SIN.

3.3 Research Strategy and Data Collection The research findings of this inquiry are based on a case study. The following instruments of data collection where used: questionnaires (9) and in depth interviews (20). In addition preliminary research was done to get the research problem more lucid. This relied heavily on desk research. The research is based on a case study due to that the required collectable data needs to be gathered from multiple sources (Yin, 2003). This research is also based on a case study due to the unfamiliarity of the shot peen technology. A research only based on survey and using questionnaires would have been much more limited. In order to enhance accuracy and quality of data it was to decide to use case study approach. The unit of analysis is the economic feasibility of shot peen services. The assignment given by SIN is to measure the feasibility of opening a separate JSP division, under supervision of the company. The units of observation are sources that will be observed in order to gain the desired data to measure the economic feasibility of the JSP division. In (REFER TABLE 1 R.P.) all units of observation, including the motivation, are discussed. In the book Business Methods for Business Students (Saunders, Lewis en Thornhill, Margin of Error), chapter 7, a table with fixed numbers gives an indication in the minimum required sample size compared with the size of a population. Due to the uniqueness of the technology only a small population (10) could be used as sample in this research. In order to assure reliability a census was opted. The population of this inquiry consist out of the former director of MIC Sint-truiden and all managers of SIN who have a certain insight in the shot peen technology, business operations of SIN and business operations in general. MIC can be considered as the greatest competitor of the JSP division. This selection has been made in order to gain reliable and accurate information that is relevant to this research.

3.3 Credibility of the Research In order to assure the quality of the conducted research measurements are taken which increase the reliability and validity of this inquiry. Reliability of this research is measured by posing three questions (Easterby-Smith, Thorpe en Jackson): Will the measures yield the same results on other occasions? Will similar observations be reached by other observers? Is there transparency in how sense was made from the raw data?

Also other measurements are taken in order to assure the reliability of the research. These measurement are based on theory discussed in the fifth edition of the book “research methods for business students” (Saunders, Lewis en Tornhill, Research Methods for Business Students) and are illustrated in (refer table). Also potential threats to the validity of a research have been studied. Measurements taken in order to assure reliability of the inquiry

Participant error In order to increase the reliability of this research, most interviews were held on Tuesday, Wednesday and Thursday. This measurement has been taken in order to avoid the “weekend-feeling” on Monday and Friday. This “weekend-feeling” might influence the quality and reliability of the answers given by the interviewee.

Participant bias It might be so that interviewees tend to report what their bosses want them to say. In order to avoid such situations, anonymity of most interviewees has been assured.

Observer error In order to make a reliable analysis, questions in the in-depth interviews will be asked in different sequences and in different forms. Also questions to confirm the researcher’s interpretation are asked in each particular in-depth interview.

Neutrality The researcher has been neutral from the beginning. Conclusions and recommendations are based on findings of the research and will be drawn from a neutral point of view. They are not based on the desires of SIN.

Table 1: Measurements taken in order to counter threats of reliability of the research

In order to assure validity of the research, the steps of “Logic leaps and false assumptions” (Raimond). The steps of logic leaps and false assumptions are illustrated in (REFER TABLE).

The steps of logic leaps and false assumptions

Identification of the research population The population consists out of key-staff of SIN and the former division manager of a competitor. All possess a considerable amount of knowledge and expertise about the shot peen technology, the surface-treatment market or both.

Data collection Through in-depth interviews, interviews, the study of company documents, personal observations and desk research executed on the right population assures validity of the conducted research.

Data interpretation A deductive method is used in order to assure validity of the conducted inquiry. The data is gathered first and secondly the data is applied to several theories and analyses in order to gain the right interpretation of the gathered information. Theories and analyses are compared and critically analyzed before applied in order to gain results that are most suitable to the situated problem.

Development of conclusions The research questions are structured according to the fishbone diagram (Refer fish). The report is

based on the structure of the research questions, so are the conclusions. A critical view at the conclusions have been made. Other questions that derive from the conclusion have no influence on whether the JSP division is economic feasible or not.

Next to measurements taken in order to assure a reliable and valid research all incidents that can possibly decrease the reliability and validity are reported in (Refer table). Limitations of reliability and validity

The interview with Kris Maes is key data for this inquiry. Mr Kris Maes has, in his opinion, unfairly been fired. Therefore a neutral perspective of the interviewee cannot be granted. Still the acquired data remains a very valuable finding for this research.

The interviews among key-staff of SIN regarding the SWOT-analysis might be interpreted on several different ways due to that the interview has been held in the form of a template. Also internal and external factors were not distinguished from each other which is caused by lack of knowledge of the proposed theory. This limitation does not have a direct effect on the quality of the SWOT-analysis due to that several theories are applied in order to acquire the required data.

The competitor analysis, except for MIC, is mainly based on a study of their websites and online information. It is a broad indication of who the competition is and to what extent they operate.

3.4 Planning and Execution of the Research A planning of the conducted research can be found in (REFER TABLE). Activity Time frame (in hours)

Company scan 100 Research proposal

Discuss goal of Research Design Supervision Revising

200 1 180 10 9

Literature review

Selecting desired literature Writing the literature review

60 54 6

Fieldwork

In-depth interviews Analyzing preliminary research Reporting data and drawing conclusions

250 175 25

50

Formulating strategic implementation plan

Preparing financial statements Sales estimation

200 150 50

Finishing the full draft of the thesis

Spelling check and structuring report 25

25 Total hours spend on thesis 835

During the execution of the research the following risks were taken into account

Lack of commitment of the staff of SIN (in-depth interviews and interviews).

Lack of commitment of competition

None of these risks have occurred during this research and therefore no report has been made on issues regarding project risks 3.5 Summary This chapter starts with a list of the designed research questions. Per research question is discussed: The relevance of the research question in comparison with the research goal. The theories applied in order to answer the particular research question. The instruments used in order to gain the required data.

Furthermore the validity and reliability of the research is discussed in this chapter. Theories applied in order to assure reliability and validity are illustrated in tables. Limitations of the reliability and validity are also processed in a table in order to give an indication of the deviation of the stated level of credibility. Lastly a planning has been illustrated together with potential risks which could possibly interfere with the research.

Chapter 4 SIN and its Internal & External Environment 4.1 Introduction In order to measure economic feasibility, external and internal factors of the JSP division should be studied. The chapter consists out of 5 different analyses:

Competition analysis

Resource-based view

Porters five forces model

STEP-analysis

SWOT-analysis The first 4 analyses are conducted in order to substantiate the SWOT-analysis. A SWOT-analysis is a very broad indication and mostly further study is required in order to verify the findings. The SWOT analysis is processed in a confrontation matrix which provides the reader strategic insights. 4.2 Competition analysis This analysis is executed in order to identify competition of the JSP division and to what extend they offer JSP services. The analysis has been conducted on three companies which are considered the major competitors of the JSP division of SIN (SIN). The three companies that are analyzed are: Wheelabrator Group Metal Improvement Company (MIC) CTB Holland

All remarkable characteristics of the previous companies listed above are registered and processed in the analysis. Information has been gathered through desk-research, an interview and an in-depth interview with the former division manager of MIC. In the three tables listed below a glimpse of the outcome of the analysis can be viewed, followed by a further elaboration of the analysis. Subjects JSP of SIN CTB Holland Wheelabrator MIC

Facilities in UK, NL, GER and FR.

1 1 3 12

Facilities in UK, NL, GER and FR in %

5.88% 5.88% 17.65% 70.59%

Number of industries

3 4 3 7

NADCAP certification

No No Yes Yes

Other certifications

ISO9001 ISO9001 ISO9001 & AS9100 rev. C

FAA, CAA, EASA, ISO9001, AS9100, QS9000 & TS16949

Variety of treatment Techniques offered

1 8 2 4

Offer on-site shot peening

Yes Yes No Yes

Operational scope Europe (mainly Benelux)

Globally Globally but delivered in limited locations

Globally

Remarkable specialties

Equipment manufacturer

Collaborating with Universities

Equipment manufacturer

Expertise in the architectural industry

Specific Conclusion of Competitor Analysis

Rated subjects JSP of SIN CTB Holland Wheelabrator MIC

Expertise 7 6 7 8

Location(s) 6.5 6.5 7.5 9

Reputation(references) 6 6 7 8

Appearance 8 7 8 7

Rated Conclusion of Competitor Analysis Website

JSP of SIN

CTB Holland

Wheelabrator

MIC

First impression 8 7 9 6

Design of website 7.5 6.5 9 6

Content of website 6.5 6.5 8 8

Easiness to contact 8 8 8 8

Overall website 8 6 8 7

Conclusion of Website Analysis

4.2.1 Wheelabrator Wheelabrator is providing job shot peen services and call themselves “the leading specialist in sub-contract peening services”. Sub-contract peening is equal to job shot peening. They base their job shot peen services on the aerospace, automotive and architectural industry. Wheelabrator acclaimed NADCAP accreditation which emphasizes their professionalism. (Wheelabrator, Shot peen services, 2013), (Wheelabrator, NADCAP, 2013) Industries Aerospace The components that Wheelabrator Impact process, range from (very) large wing ribs to undercarriage components. Also aero engine compressor blades, fan blades, drums, spinners and supporting components are fully catered for. Wheelabrator Impact recognizes the demands on lead times and therefore they are focused on “how quickly customers demand their components to be turned round”. They offer a fast lead time and the so called “Air On Ground” service for regular unforeseen emergencies that frequently occur in the aerospace industry. Wheelabrator Impact carries out three main elements to the aerospace shot peening processes: 1. Saturation fatigue enhancement peening 2. Correction peening 3. Peen forming (Wheelabrator, Aerospace, 2013)

Figure 1: Wheelabrator logo (Wheelabrator, Home, 2013)

Automotive There is not much information of how Wheelabrator Impact is specialized in shot peen service regarding the automotive industry. They explain the importance and the benefits of shot peening in the automotive branch and which components can benefit considerably from this process. They also offer the “REM super finishing green isotropic process” which is specifically designed to polish the surface of gears. The REM process reduces friction, increases the transmitted power and decreasing the noise (Wheelabrator, Automotive, 2013). Architectural One of the industries where Wheelabrator position themselves in, is the architectural industry. They provide non-ferrous ceramic and glass bead peened finish on aluminum and stainless steel which is called ‘Peen Plus’. Peen plus has been developed to adapt to the desires of architects and thereby eliminating the risk of any cross contamination from old steel shot methods that were used previously. Shot peening in the architectural industry is momentarily the preferred finish solution for the cosmetic finish on stainless steel cladding, skirtings, sculptures, doors and hand railing on underground and mainline railway stations, airport terminals, public and commercial buildings (Wheelabrator, Architectural, 2013). Online sales strategy Wheelabrator tries to convince the customer to utilize the availability of job shot peening with the following arguments (Wheelabrator, Shot peen services, 2013): Shot peening is a highly skilled process which often requires approvals and accreditations Having peace of mind that your components will be delivered on time and to refrain from project management from the customers side. Ensuring that all industry approvals and accreditations are met without the need for investment on the customers behalf. Minimizing capital investment of the customer. No need for extension of workforce . No need for extension of the factory. To save time, resource and expense to achieve high standards. Flexibility when new components needs to be processed. Benefiting from (AOG) service. Having the convenience of the shot peening process being carried out at the Wheelabrator Impact premises. To stay informed about the latest industry and technology developments.

Operational area Wheelabrator claims to offer job shot peening globally, still it will be delivered in limited locations. Quote: “Shot peening subcontract services are offered globally but delivered in limited locations. Contact us to discuss your requirements.” (Wheelabrator, Automotive, 2013) Afterwards, it is noted that Wheelabrator has two job shop peening facilities in the UK and one in France. Based on this information it can be assumed that their job shot peening services are limited to the districts of the UK or France but that they are open to expand or

operate globally (Wheelabrator, Shot peen services, 2013). Next to job shop peening, Wheelabrator offers a sub-contract service in “vibro finishing”. They have a relatively broad assortment which increases the scope of the company. Expanding their sub-contract services, might enable Wheelabrator to reach their potential customer more easily and makes them more specialized in the outsourcing market of surface treatments (Wheelabrator, Vibro Finishing, 2013). Website

Name: www.wheelabratorgroup.com

Languages: 10 Job shot peening is promoted fairly well on their website under the name “sub-contract peening”. This part of the website looks professional and convincing for the neutral reader. Examples of components that can be shot peened are given and the website argues the benefits of job shot peening that can give a decisive incentive for the potential customer. All the shot peening pages on the website contain a closing sentence with a link to contact the company, this eases the customer in contacting Wheelabrator. At least, they are confronted with contacting the company on each page of their website. Furthermore the website reflects that Wheelabrator is not only a service orientated company but is also specialized in the manufacturing of surface treatment equipment (Wheelabrator, Home, 2013). Summary Wheelabrator is a competitor that accredited NADCAP certification and therefore is allowed to operate in particular areas in the aerospace industry where SIN cannot. They offer job shot peen services and have it already broadly integrated on their professional looking website. Next to the aerospace and automotive industry they offer job shot peening in the architectural industry. Some of the job shot peen services of Wheelabrator include other services from which it is unknown if extra costs are involved. The benefits of job shot peening are argued on their website which can cause a decisive incentive for the potential customer. Wheelabrator has job shot peening facilities in the UK(2) and in France(1). They offer the service worldwide but delivered in limited locations. It is safe to assume that the limitation of the deliverable service lies in the transportation costs of the component. Clients are welcomed to discuss the requirements where the sales department of Wheelabrator probably tries to find a medium between them and the client. We can assume that the transportation costs are involved in this conversation. Next to job shot peening, Wheelabrator offers other surface treatments, for example, “vibro finishing”. The extensiveness of their “sub-contract services” gives them a lead in the outsourcing market compared to SIN. It also involves the possibility to encounter potential customers for other services of Wheelabrator. Furthermore, it can be concluded that the website of Wheelabrator is a professional looking and convincing website that contains a lot of information about the industry.

Figure 2: Screenshot of Wheelabrator webpage (Wheelabrator, Home, 2013)

4.2.2 Metal Improvement Company MIC has been a pioneer in the shot peen industry since 1945 by developing and advancing the state-of-art in customized shot peening equipment and shot peening techniques. Momentarily they operate in 39 shot peen facilities throughout the world whereof 17 facilities are located in Europe. Furthermore they focus on coating services, laser peening and reed valve manufacturing (MIC, Company Overview, 2010). Industries MIC has experience in the aerospace, automotive, chemical & petrochemical, mining, medical, agricultural and the transportation industry. They have also executed shot peening on turbo machinery, processing machinery and other metal components (MIC, Success Stories, 2010).

MIC also offers shot peening in the architectural industry. This industry is not listed at their references (success stories) but it appears to be one of MIC’s specialties . They have shot peened some familiar structures throughout the world, for example, the Louvre pyramid and the Dublin Spire. Other architectural projects were, for example, all sheet metal desk areas of the British museum and parts of the Stratford main station in the UK (MIC, Architectural, 2010).

Figure 4: Stratford station after being shot peened (MIC, Architectural, 2010)

Figure 3: Metal Improvement Company Logo (MIC, Home, 2010)

Online sales strategy MIC asks the neutral reader of their website why they have to make use of the job shot peen services of MIC. They have published a list of critical statements that discourage customers to purchase shot peening machinery and encourage them to make use of the job shot peen services that MIC offers (MIC, Advantages of Collaboration, 2010). Next to that they offer the customer the C.A.S.E process, an extra feature that contributes to the quality of the shot peening process. C.A.S.E consists out of shot peening with an isotropic finishing. This finishing removes the asperities left from shot peening and retains shallow micro-indentations for lubricant retention. The figure on the right shows a roughness profile of a carburized gear after shot peening and after the isotropic finishing (MIC, C.A.S.E, 2010). MIC developed their own quality control technologies: - Peen stress (Computer software) - Peen scan (Scientific process) - Peen scan pen (Scientific process) (MIC, Peenstress, 2010), (MIC, Peenscan, 2010) and (MIC, Peen Scan Pen, 2010). Due to the fact that these technologies are developed by MIC themselves, emphasize the knowledge and innovativeness of the company. This leaves a confidential impression on the customer which can be the decisive factor to potential customers. With “on-site peening” MIC offers a comfortable service to its customer. Companies with components which size exceed shipping limitations or which are installed at their foundation can exploit the shot peening service of MIC. In order to achieve the same level of quality with on-site shot peening they utilize almen strips, proper coverage and certified peening media. Customers are able to attend the whole shot peening process and with the on-site peening service the time of shipping the components becomes due. In some circumstances this can be a great benefit for a company (MIC, On-Site Peening, 2010). The diversity of the shot peen service that MIC offers is relatively big. The extend of the service that they offer is what they call “shot peen forming”. The shot peen forming service enables the possibility to form the processed material in a compound convex curvature on the peen side. Costly time of developing and manufacturing hard dies will be eliminated and it reduces material allowance from trimming. The forming process also enables the possibility to design changes after initial

design (MIC, Shot Peen Forming, 2010).

Figure 5: Comparison roughness profile (MIC, C.A.S.E, 2010)

Figure 6: Shot peen forming facility of MIC (MIC, Shot Peen Forming, 2010)

The diversity of services that MIC offers within the shot peen market, emphasizes their knowledge about shot peening. With new technology and huge facilities, see Figure 10, they are able to gain trust from potential customers by whom reliability of the supplier plays a role in the decision making process. Operational area MIC’s shot peen facilities are established globally. They possess 20 shot peen facilities in the United States, 17 shot peen facilities in Europe, 1 shot peen facility in China and 1 in Canada. They claim that all facilities have respective certifications that could include: FAA, CAA, EASA, NADCAP, ISO9001:2000, AS9100, QS-9000 and TS16949:2002 registrations (MIC, Portfolio, 2010). Regarding job shot peening, MIC competes SIN directly in the following countries (MIC, Facilities, 2010): Germany (4 shot peen facilities) Belgium (1 shot peen facility) France (2 shot peen facilities) United Kingdom (5 shot peen facilities)

As far as can be confirmed, 4 of the 5 shot peen facilities in the UK accredited the NADCAP surface enhancement certificate. Information about NADCAP accreditation about the other facilities cannot be found online (MIC, UK Approvals, 2010). Furthermore, MIC specializes in more outsourcing servers such as; laser peening and coating services. The expansion of their treatment services might enable MIC to reach their potential customer more easily and makes them more specialized in the outsourcing market of surface treatments (MIC, Company Overview, 2010). Mr Kris Maes (refer interview) emphasized in his interview that being NADCAP accredited is an added value and contributes significantly to client recruitment. Website Name: www.metalimprovement.com Languages: 10

The first impression of the website was rather poor. Not only the cheap looking design but also the accuracy of the content of the website was incorrect. Apparently is the “about us” part of the website not updated in comparison with the rest of the website. They state that they have 36 shot peen facilities globally but under the “find a location” button 39 shot peen facilities can be found. While studying the website, it became visible that MIC is the most developed company among the competition. They offer a wide variety of shot peening services and invented own quality control tools. Accurate information is given and a lot of photos and examples are illustrated on their website. The reader is able to share the website pages on Facebook and other social media and it is easy to get in contact with the company. It is also able to register yourself to get access to particular articles of MIC (MIC, Home, 2010).

Figure 7: NADCAP Logo (Solar Atmospheres, 2011)

Figure 8: Screenshot of MIC’s website (MIC, Home, 2010)

Summary With 39 shot peen facilities throughout the world MIC can be acknowledged as the world market leader in this market segment. They have a huge lead on the competition, especially in Europe, which is more relevant to SIN. The ability to establish a facility in China, which involves strict political and legal demands, indicates the power and professionalism of MIC. They have job shot peen experience in several industries, one of them is the architectural industry. Examples of assignments that they have executed within this industry are the Louvre pyramid and the Stratford main station in the U.K.. MIC tries to discourage companies to purchase shot peen machinery, by stating critical areas that should be taken into consideration before realizing these type of equipment. By discouraging companies who are in need of shot peen machinery, they encourage them to make use of the job shot peen services of MIC. To comfort the customer they offer self-developed technological features next to the basic job shot peen services such as, quality control tools, isotropic finishes and on-site shot peening. This gives an indication that they have an active R&D department. With shot peen facilities in the UK (5), Belgium (1), France (2) and Germany (4), MIC is able to provide shot peen services in a wide area. The average costs will probably be less due to that the transportation costs of components or shot peen machinery (on-site peening) will be less than Wheelabrator or SIN. Furthermore it is known that four of the five shot peen facilities in the UK are NADCAP (surface enhancement) certified and they claim that all facilities have respective certifications. Based on the number of shot peen facilities, we can conclude that MIC is the market leader, they possess a huge market share of this market segment. With such a position in the market it is from great importance to have a professional looking website with accurate information. It is clearly visible that the website is not fully updated, it has a poor design and is not accurate. The content of the website is good; all relevant information is given and clearly explained. Still it lacks professionalism which is unsuitable for a company with such expertise. Based on an in-depth interview with the former division manager of MIC Belgium (Maes), a profile have been designed of the Belgian division of MIC. The profile is processed in (REFER TABLE). Subject Description

Equipment “Peen-O-matic”, designed and manufactured by MIC. Hand peening equipment. MIC does not sell this equipment, unless a client threatens to leave. This machinery is old and low-tech and is used since the 1960’s.

Operating scope Benelux

Strength Size of the company

Weakness Size of the company; MIC lacks flexibility

Advertisement None.

Employees 7

Ambitions to expand to Dutch market. Have been spoke of.

Competitive advantage The size of the company and its financial power. The Curtis-Wright group is able to purchase a whole “boot” which is not feasible for smaller companies.

Figure 9: CTB Holland Logo (CTB, Home)

4.2.3 CTB Holland BV CTB Holland BV is a company which specialized in surface treatments for the petro-chemical, food, dairy and metals based industry. With over 25 years of experience in the field they claim to be a flexible and very dynamic company. Next to the surface treatments they provide customers with information and advisement on surface treatments. Furthermore, CTB has been certified in ISO, NEN and VCA since 1995 (CTB). Industries and techniques CTB is specialized in the petro-chemical, food, dairy and metals based industry. The surface treatments that they offer consist out of 11 different types of techniques all with different purposes. This indicates why they are focused on different industries than Wheelabrator and MIC. Still, with references such as Shell, Dupont and Bayer, they prove to be a company with the expertise and ability to perform quality surface treatments (CTB, Techniques). Online sales strategy CTB tries to convince the reader to make use of the shot peen services that they offer with the following arguments: CTB Holland BV claims to be an early player in the job shot peen industry; they job shot peen on location and at their own facility since the late 70’s. They publish on their website that they collaborate with different universities regarding research to the effects of shot peening and that they were the promoter of many research programs. They also possess a data base that record all the critical parameters that they use for treatments in the future. Furthermore they claim to have disposition over special control and measuring equipment (CTB, Shot Peening). Operational area

The facility of CTB is established in Dordrecht, the Netherlands. There is no information to be found that they are in possession of other facilities in the Netherlands or in another country. After studying the references page on their website, it can be confirmed that they operate globally. Their customers are companies established in Germany, United Kingdom, France, the Netherlands and surprisingly in

the USA. Still, most of their clients are located in the Netherlands and Germany which indicates that there is a demand for job shot peening for Dutch, smaller to medium, companies (CTB, Refrences).

Figure 10: Techniques offered by CTB (CTB, Techniques)

Figure 11: CTB Facility Dordrecht, The Netherlands (Google Maps)

Next to the shot peening service CTB offers a “special form” of shot peening; Micro peening®. Micro peening involves pure glass beads that hammer the surface of the processed component and it is said that it is environmentally friendly and cost saving. Furthermore, the 9 other technics of surface treatments that CTB offers is giving them a lead in the outsourcing market of surface treatments. Companies who are looking for the possibility to outsource services may have more trust in a company who is specialized in this market rather than a company who builds the to execute the services (CTB, Micro Peening®). Website Name: www.ctbholland.com Languages: 2 On all aspects it is recognizable that CTB is a smaller operating company than Wheelabrator and MIC. The website looks professional and the information provided is clear. There are not many options on the website and sometimes there are spelling mistakes in the English version of the website. Still, it is clear what they do and which services they offer. Contact information is shown on every page of the website which eases the customer to contact the company. Furthermore they publish findings of their research in the “science and technology” folder

on their website which indicates that they have an active R&D team. Summary CTB Holland BV is a service orientated company that specializes in the petro-chemical, food, dairy and metal based industry. By offering 11 different surface treatments they prove to be a dynamic company. They are researching the effects of shot peening in collaboration with different universities which means that new knowledge flows into the company over time. They use this argument to convince the customer to be provided with the best quality results. To comfort the customer they offer shot peen services on location and claim to do this since the late 70’s. The expertise of the shot peening on location service can be a decisive incentive for a company to contract the company as supplier in surface treatments. One of the technics that they offer next to shot peening is Micro peening®. This is a variant of shot peening which involves pure glass beads to execute the process. Their website gives clear information about the surface treatments that they offer, every page of their website can be published on Twitter and Facebook.

Figure 13: Screenshot of the website of CTB (CTB, Home)

Figure 12: Results of Micro peening® in a table (CTB, Micro Peening®)

4.3 Resource-based view 4.3.1 Introduction The resource-based view is applied in order to identify the resources of SIN and its JSP division in order to measure to what extent the company possesses a competitive advantage. The measurement will be executed based on the resources of SIN. The theory behind the resource-based view is that, when organizations have the same resources but differ from performance, it is a sign to what extent resources are utilized (Henry, 2008). This paragraph gives a clear view of what resources SIN possess and whether these resources form a competitive advantage (refer theory). 4.3.2 Resources In this concept resources can be defined as all assets, orginizational processes, knowledge, capabilities, etc. controlled by a firm which can be used as a tool to conceive of and implement strategies that causes improvement in efficiency and effectiveness (Akio). The resources of SIN are listed below. Resources of SIN

Building.

Shot peen equipment.

The ability to design surface treatment equipment.

Capability of manufacturing surface treatment equipment.

Knowledge of how to design and manufacture surface treatment equipment.

Expertise in designing and manufacturing surface treatment equipment.

Reputation as surface treatment equipment manufacturer and designer.

Staff with the ability to apply the shot peen technology

The JSP division

The rental division

Affiliates and Joint Ventures

ISO9001

Approvals of respected companies

High service level

Capital

4.3.3 Tangible Resources VS Intangible Resources The resource based-view is an evaluation of the resources and capabilities that reside within a company (Henry). The capabilities derive from one, or a combination of more resources of the particular company. According to (Henry) resources can be divided in “Tangible resources and Intangible resources”. Tangible resources can be referred as physical assets that a company possess. These resources are urged to be responsive and flexible towards changes in the market place. Intangible resources can be referred as intellectual and technological assets that a company possess. It emphasizes the image, capabilities and professionalism of an organization. The tangible and intangible resources of SIN and its JSP division are illustrated in (REFER TABLE). Tangible resources Intangible resources

Building

Shot peen equipment

Rental division

Affiliates and Joint Ventures

Capital

The ability to design and manufacture surface treatment equipment.

The knowledge of how to design and manufacture surface treatment equipment.

Reputation as surface treatment equipment manufacturer and designer.

Expertise in designing and manufacturing surface treatment equipment.

Staff with the ability to apply shot peen technology.

JSP division

ISO9001

Approvals of respected companies (i.e Multinationals) and government related companies.

High level of service

Application: Due to that the offering of JSP services is a capability which is not easy to imitate by other organizations the JSP division will be viewed as an intangible resource due to that intangible resources need to be acquired before competition is able to establish a JSP division. The rental division is viewed as a mobile resource due to that competition has the ability to purchase equipment that SIN leases.

4.3.4 Comparison With Competition In order to identify whether SIN already has a competitive advantage or not, all immobile resources should be compared with the competition. For this comparison, data from the competitor analysis will be used. When a resource appears to be imperfectly imitable, hard to substitute, valuable, rare and is not possessed by competition, there can be spoke of a competitive advantage. In (REFER TABLE) all immobile resources of the JSP division of SIN are compared with their direct competitors. If specific remarks are urged to be made, they will be registered in the column for remarks in (REFER TABLE).

Intangible Resources SIN MIC CTB Wheelabrator Remarks

The ability to design and manufacture surface treatment equipment.

The knowledge of how to design and manufacture surface treatment equipment.

MIC does only manufacture for its own affiliates, not for commercial purposes

Reputation as surface treatment equipment manufacturer and designer.

Expertise in designing and manufacturing surface treatment equipment.

Staff with the ability to apply shot peen technology.

ISO9001

Wheelabrator is also NADCAP accredited. MIC is NADCAP accredited and has numerous other certificates.

Approvals of respected companies (i.e Multinationals) and government related companies.

High level of service

Tangible Resources SIN Building

Shot Peen Equipment

Rental Division

Not relevant to the JSP Division

Affiliates and Joint Ventures

Capital

This resource is hard to measure. Therefore it assumed that all competitors are in possession of a certain degree of financial power. Assumed is that MIC has the most financial possibilities followed by Wheelabrator.

4.3.5 Competitive Advantage In (ref table) a comparison has been made in order to determine whether the JSP of SIN has a competitive advantage over its competition. As stated before, a competitive advantage can be defined as a valuable capability which is hard to substitute, imperfectly imitable, rare and not in possession of competition. The results of the table indicate that every resource of SIN is in possession of at least one competitor. The rental division cannot be considered as a competitive advantage due to that it does not fulfill the requirements. Besides, the rental division is involved in a different market with different competitors and therefore is not considered as relevant to the JSP Division. According to these findings it can be determined that SIN does not possess competitive advantage over its competition. 4.3.6 Summary In this chapter the theory of resource-based view is explained. All resources of SIN are identified and distinguished in “tangible resources” and “intangible resources”. All resources which are imperfectly imitable, hard to substitute, valuable and rare are processed in (REF TABLE) and compared with the competition of SIN. Based on this table, it is determined that SIN has no competitive advantage over its competition due to that at least one competitor is in possession of any of the relevant resources stated.

4.4 Porter´s Five Forces Model To gain an indication of the market position of SIN, different types of analyses are executed. The 5 forces model is applied to gain insight in the competitive strength of the new division. Competitive opportunities and threats will be determined and therefore this analysis contributes to the competitive approach of the division. Porters 5 forces explained and applied The purpose of the 5 forces model is to measure the level of competition within a particular industry. According to Porter, there are 5 different types of forces that can be analyzed. The stronger the force, the more limited established companies are in raising prices and earning profits. The five forces model is illustrated In Figure 14: Porter's 5 forces model Figure 14.

Figure 14: Porter's 5 forces model (Porter, 1979)

However, Andrew Grove, former CEO of Intel, argues that Porter overlooked a sixth force: Complementors. All mentioned forces are analyzed and applied to SIN, afterwards the findings are summarized and processed in a table. When a force is found to be weak, it can be recognized as an opportunity. When a force is found to be strong it can be recognized as a threat (Hill & Jones, 2009). The analysis is executed based on literature of Hill & Jones (Hill en Jones). Findings are generated through interviews and in-depth interviews with the JSP Division of SIN and the former division manager of MIC (refer interviews).

4.4.1 The first force: Risk of entry by potential competitors. Potential competitors are identified as companies that are currently not competing but are capable to enter a market when they desire to do so. When there is a high risk of entry, there is a strong competitive force and there can be spoken of a threat. When there is a low risk of entry, there is a weak competitive force and there can be spoken of an opportunity. Whether the force is strong or weak is being measured by the height of barriers that need to be faced to enter the market. It is said that, the greater the costs are to enter the market, the lower the risk of new entries in the market. The barriers that need to be measured are: - Economies of scale - Brand loyalty - Absolute cost advantages - Customer switching costs - Government regulation

Economies of scale; Unit costs will fall, when a firm expands its output. Economies of scale Industry SIN

Cost reduction gained through mass producing a standardized output.

Negative Negative

Discount on bulk purchases of raw material inputs and component parts.

Negative Negative

Advantages gained by spreading fixed production costs over a large production volume.

Negative Negative

Cost savings associated with spreading marketing and advertisement over a large volume of output.

Negative Negative

Table 2: Economies of scale

Brand loyalty; Customers have preference for products/services from a well-established company. The risk of entry will be reduced due to that companies considering it too costly to break down brand preferences.

Branding activities Industry SIN

Continuous advertising

Positive Positive

Patent protection

Positive Negative

Product innovation (R&D)

Positive Negative

Emphasis on high quality

Positive Positive

Good after-sales service

Positive Positive

Table 3: Branding activities

Absolute cost advantages; Entrants are unable to match the low cost structure of established companies.

Absolute cost advantages Industry SIN

Due to expertise and experience, patents and secret processes, production operations and production processes became superior.

Positive Negative

Required inputs such as labor, materials, equipment or management skills are limited in their supply.

Positive Positive

Access to cheaper funds.

Positive

Positive

Table 4: Absolute cost advantages

Customer switching costs; When high costs are involved when switching to a new entrant.

Customer switching costs

Negative

There are no switching costs involved in clauses in contracts with customers. Customers are free to go without having to pay any costs.

Table 5: Customer switching costs

Government regulation; Government regulations that form a barrier to enter a particular industry.

Government regulation

Positive:

There are no government regulations that can form a barrier for new entrants of the surface enhancement industry. Still, industry certifications have significant influence on new entrants. Approvals such as NADCAP can form a barrier for new entrants within the surface enhancement industry. NADCAP accreditation is hard to achieve and other certifications such as ISO, which put emphasis on the professionalism of a company, are highly valued among established companies within the targeted industries.

Table 6: Government regulation

Summary of the first force: The Risk of New Entrants

After analyzing the first force; “The risk of new entrants”, it can be concluded that the risk of new entrants within this industry is moderate. The arguments to substantiate this conclusion are listed below.

Economies of scale: Negative

The outcome of the analysis indicates that the JSP division has no to little economies of scale. This is due to that the JSP division is not able to render a massive quantity of the job shot peen services. Based on the interview with Mr Kris Maes (refer appendix) it can be determined that MIC is not able to

gain economies of scale.

Branding activities: Positive/Negative

Positive branding activities are ongoing within SIN, continuous advertising in magazines and on websites are used as a promotional tool to create awareness of their existence in the industry. Characteristics of SIN and its JSP division are putting emphasis on high quality and a good after sales services. Still, there is room for improvement with regards to R&D; product innovation and patent holding can be a great opportunity to keep new entrants out of the industry. There is downside of this story, the advertising activities are not specifically focused on the JSP Division. Also MIC does not spend much attention on promotional activities regarding shot peen services (refer appendix KM).

Absolute cost advantages: Positive

The JSP division does not possess any superior process that origin from expertise and experience, patents and secret processes. Still the opening a job shot peen division require inputs, such as labor and equipment, which are limited in their supply. MIC creates absolute cost advantages by operating with depreciated equipment which are not up to date to current technology. They operating with the minimum requirements and therefore are able to create an absolute cost advantage.

Customer switching costs: Negative/Positive

There are no switching costs involved. The JSP division is still relatively small and limited in customers, therefore such contracts are momentarily not applied.

Government regulation: Positive

There is no government regulation that can form a barrier to new entrants of this industry. Still certifications such as NADCAP, ISO and CE are highly valued among companies already established in the targeted industries. These certificates are no easy achievements and therefore it can form a barrier to potential entrants of the industry.

Table 7: Conclusion of Force one

4.4.2 The second force: Rivalry among established companies. Rivalry can be defined as “a competitive struggle between companies in an industry to gain market share from each other” (Hill & Jones, 2009). Different types of competitive weapons are used in the fight for market share. Examples of these weapons are: - Price - Product design - Direct selling efforts - Advertisement and promotional spending - After sales service and support When rivalry get more intense companies will lower prices or they will spend more on non-price competitive weapons. Intense rivalry can constitute a threat due to that a company is forced to lower prices or increase cost. For companies, there is the opportunity to raise prices when rivalry is less intense. Four factors are determining the intensity of rivalry: - Industry competitive structure - Demand conditions - Cost conditions - Height of exit barriers in the industry

Industry competitive structure; Fragmented industry VS Consolidated industry

Fragmented industry Consolidated industry

Large number of small and medium sized companies, where non off them are in the position to determine prices.

Low entry barriers

Offer commodity products which are hard to differentiate

Dominated by a small number of large companies

In position to determine industry prices Companies are interdependent

Table 8: Fragmented industry VS Consolidated industry

Based on the characteristics in (REFER TABLE) it can be determined that the JSP Division is situated in a consolidated industry. Due to the interdependency in a consolidated industry, competitive moves have a direct effect on profitability of companies within that particular industry. Rivalry will increase when companies undercut prices of their competitors, or create more value in the products that they offer. These actions will have a direct effect on the profitability of the industry. To reduce this threat, companies follow the prices which are set by the most dominant company in the particular industry.

Industry demand Industry demand is a determining factor that may lead to intense rivalry. When the demand in an industry is low, companies are forced to gain market share from each other in order to maintain profits. When the demand is high, there will be more buyers, thus no need to fight for each other’s market share. The JSP Division involves low industry demand due to that there is a low degree of awareness of the offered technology. Once the degree of awareness increases, it is possible that demand increases as well.

Cost conditions Companies with high fixed costs and a low sales volume are not able cover their costs, in order to increase their sales volume they are forced to cut prices or spending more on advertisement and promotional activities. On the contrary, when demand is not growing fast enough more companies feel forced to adapt to the moves of the competition and will eventually cut their prices or increase promotional spending too. The result can be intense rivalry and lower profits. According to research, often the weakest companies initiate such actions.

Exit barriers Exit barriers are barriers which withholds a company from exiting the particular industry. When rivalry gets too intense, companies can decide to give up, to exit the industry and to put their efforts in a different industry. Sometimes exit barriers are more expensive than staying in the industry and fight competition. When exit barriers are high, companies can be locked up in an industry, without making profit, unable to quit. Examples of exit barriers are given in the figure below.

Common exit barriers

Investments in assets that cannot be exploited for alternative use or cannot be sold off. Examples of such assets are specific machines, equipment and operating facilities.

The fixed costs of exiting the industry; Pensions, redundancy costs and health benefits that the company needs to pay to its employees when it stops operating.

Economic dependency. Emotional attachments to an industry. Expensive collections of assets need to be maintained at or above a minimum level to be able to

participate in the particular industry. Bankruptcy regulations; When a company has a certain form of responsibility, regulations can be

applied. For example, UPS will not be able to deliver parcels in Miami due to that the sales volume cannot cover their fixed costs.

Table 9: Common exit barriers

Summary of the second force: Rivalry Among Established Companies

After analyzing the second force; “Rivalry among established companies”, it can be concluded that rivalry among established companies within the industry is relatively high. The arguments to substantiate this conclusion are listed below.

Industry competitive structure: Strong

The JSP division is part of a consolidated industry, a few, relatively large companies are dominating this industry and therefore the interdependence is relatively high. MIC uses price as a competitive weapon (applying old depreciated equipment to realize cost reduction) to recruit clients which has a direct effect on SIN. However, the JSP division does not need to adapt to the prices of MIC, they use their image, quality, flexibility and professionalism as a competitive weapon to differentiate themselves and to recruit clients. Due to that competitive weapons are intensely used, there can be spoke of a strong competitive structure which forms a threat to SIN.

Industry demand: Low

The industry demand of using shot peen services is relatively low but there is potential to increase demand. The problem is that entities are not aware of the technology and its advantages. Momentarily the low demand rate can be viewed as a threat to SIN due to that market share needs to be stolen from competition in order to be profitable. These conditions may change over time when potential buyers become aware of the shot peen technology and recognize it as a need in their production process. The result of this confluence can occur an increase in sales and profitability.

Cost conditions: Moderate

Momentarily the sales volume is too low to break-even. The problem is the low demand rate which is occurred by the low degree of awareness of the shot peen technology. Due to that the JSP division is positioned in a niche-market, competition faces the same problem. Momentarily the JSP division counts as an extra feature of SIN with possible potential to grow into a separate and profitable division. Due to that the fixed costs of the division are indirectly covered by SIN there is plenty of room for development and no crucial need to increase sales, therefore this sub-force is not recognized as a threat neither as an opportunity

Exit barriers: Positive

There are no significant exit barriers that withhold the JSP division from exiting the industry. All assets can be sold off and used in other companies which are in need of the shot peen technology. There are no employees who are specifically employed for the JSP division. All responsible are executing other tasks within SIN which means that the exit barrier for the JSP division will be low, until the need for separate personnel will arise. Furthermore, SIN is not depending on a specific industry and emotional attachments will not prevent SIN from exiting the industry neither are bankruptcy regulations applicable. That the height of the exit barriers is low will rather form an opportunity to the division than a threat.

Table 10: Conclusion of force 2

4.4.3 The third force: Bargaining power of buyers When buyers are able to bargain down prices or to raise the costs of companies in the industry there can be refered to the third force of Porters model. With this ability they are able to increase their profits at the expense of the profits of the suppliers. Therefore, powerful buyers can be recognized as a threat. On the contrary, weak buyers can be viewed as an opportunity, companies might be able to raise prices and lower costs which has a positive effect on the profitability. The table below illustrates in which situations buyers tend to be powerful and whether this is applicable for SIN or not.

Powerful buyer situations Applicable to SIN or not

When an industry, which is supplying a particular product or service, is dominated by small companies and the buyers population consists out of a few large companies.

No threat

Sales are sold in large quantities. Buyers are able to use their purchasing power to force down prices.

No threat

When a large percentage of the total orders of a supplier are depending on the buyer(s).

(Currently) no threat

When there are no or low switching costs, buyers are able to move freely to other supplying companies. They use this ability as a leverage to bargain down prices.

Small Threat

When a buyer possess the financial resources to purchase input from several suppliers at once, buyers create a situation where suppliers need to lower prices to contract the buyer.

Threat

When buyers possess the financial power threat to enter the industry and produce the desired product themselves they will supply their own needs. A situation like this will force down the prices in the whole industry.

No threat

Table 11: Powerful buyer situations

Summary of the third force: Bargaining Power of Buyers

After analyzing the third force; “Bargaining power of buyers”, it can be concluded that there are minor situations in this industry where buyers possess a significant amount of bargaining power to force down prices of the desired product/service. The arguments to substantiate this conclusion are listed below.

The industry is not dominated by many small companies but by a few medium to large sized companies. The price of using the shot peen technology is not set and may vary per order. Due to the uniqueness of the branch of industry there is only little indication about the price of the service. Therefore the buyers possess a small, not significant, amount of power to force down the prices of the offered service. Little bargaining power involved.

The division is focused on smaller companies for who it is risky to invest in shot peen equipment. It is safe to assume that these companies will mainly come with a small quantity of components and therefore will not have much bargaining power. Still, it cannot be excluded that large orders will come in, it is inherent to large orders that the bargaining power of the buyer will increase when this occurs. Little bargaining power involved.

Momentarily the total orders of JSP activities consist out of a variety of smaller orders and therefore the buyer has little bargaining power. This situation is marked in Table 11 as “Currently no threat”. The

word currently refers to when the situation change and a buyer with a huge quantity of orders is contracted. In this situation the buyer’s bargaining power will automatically increase. (Currently) Little bargaining power involved.

As far as is known, no switching costs are applied in this branch of industry. Therefore consumers are able to move freely from supplier to supplier. This can be used as leverage in order to bargain down prices. Significant bargaining power involved.

When buyers possess the financial resources to make orders by all companies in the industry, a competitive struggle might occur. This can lead into price reduction or quality improvement, both are increasing the company’s costs and therefore it will directly affect profitability of the industry. Due to that this possibility is realistic, this situation has been marked as a threat to the JSP division. A real-life example is the JSF project which will be discussed in paragraph 4.5. Significant bargaining power involved.

The shot peen technology is a high-tech technology which involves more than buying machinery. Several trainings and experience is required to successfully execute the process. The technology is not easy to copy, it requires a lot of time and specific labor. Therefore it is unlikely that buyers with financial power will enter the industry, offering the availability of shot peen technology to the consumer. Little bargaining power involved.

Table 12: Conclusion of the third force

4.4.4 The fourth force: Bargaining power of suppliers Bargaining power of suppliers can be referred as the suppliers ability to raise input prices or to raise the costs of the industry in other ways. A powerful supplier can have a direct effect on profitability and therefore can be viewed as a threat. The table below indicates in which situations suppliers are most powerful and whether this is applicable to SIN or not. Powerful Supplier Situations Powerful or Weak

to SIN

When the buyers industry is not an important industry to the supplier. In this situation the (regular) buyer does not have the power to bargain down prices.

Powerful supplier situation

When the product of the supplier has no or few substitutes and is a crucial to companies in the industry.

Powerful supplier situation

When significant switching costs are involved when switching from supplier to supplier. These switching costs can also be in the form of the uniqueness of the particular product and the quality of the particular product.

Powerful supplier situation

When suppliers have the ability to use their inputs to produce directly competing products and threat their customer industry to realize this action.

Powerful supplier situation

Companies are not able to threat suppliers to enter their supply industry due to that they are not able to use their own input as a tactic to force down prices

Weak supplier situation

Table 13: Powerful supplier situations

Summary of the fourth force: Bargaining Power of Suppliers

After analyzing the fourth force; “Bargaining power of buyers”, it can be concluded that there are major situations in this industry where suppliers are able to force up prices of the products/services that they offer. The arguments to substantiate this conclusion are listed below.

The JSP division targets several different industries whereof none has a favorable preference or has a significant degree of importance to SIN. Delivering shot peen services is unique on its own and will rather be a necessity for other industries. Due to that other industries are relying on this unique service, the bargaining power will rather be in the hands of the suppliers than in the hands of the buyers. The situation will be considered as a powerful supplier situation.

There are only little options of technologies that can be applied to achieve the same results as with the shot peen technology. These other technologies, laser peening and cavity peening, are only applicable in specific situations. The shot peen technology is more dynamic, developed and can be applied in almost all situations. Due to its flexibility, shot peening is most preferred among above mentioned surface treatment techniques. The only obstacle that SIN may encounter are clients who prefer laser peening or cavity peening, which the JSP division does not offer, over shot peening. Still, the situation is assessed as a powerful supplier situation due to precision and the quality of the shot peen technology, and due to that laser peening and cavity peening are still in a phase of development.

The JSP division is focused on quality and service and they reflect professionalism in their processes. The division will be in a powerful bargaining situation when these factors are acknowledged and required by the switching client and competition fails to comply. In this situation the client depends on SIN to achieve their desired results and therefore have no trump card to reduce the prices of the services.

Theoretically it is possible to produce goods that needs to be shot peened, to sell them directly to intermediaries and to directly compete with current clients. For SIN and the JSP division this option is hard to realize and at the moment out of discussion. However, this theoretical possibility can strategically be used as an opportunity to force up the prices of the shot peen service as long as the buyer believes in the ability of SIN. The strategy is assessed as an extremely powerful bargaining situation for suppliers when applied properly.

When companies are able, and threatening the JSP division to enter their supply industry, it might be so that the buyer gains bargaining power and is able to demand to reduce prices. This will be considered as a weak supplier situation. At the same time, it can be seen as a small opportunity for SIN. SIN is able to contract the particular company to manufacture and install the desire shot peen machinery. The particular company is still in possession of bargaining power due to that SIN does not want its clients to switch to competition. Depending on the situation, price reduction will probably be achieved by the buyer.

Table 14: Conclusion of the fourth force

4.4.5 The fifth force: Substitute products Substitute products can form a strong competitive threat. The existence of substitute products will limit the price that companies can charge in a particular industry. Summary of the fifth force: Substitute Products

As mentioned in Table 14, bullet point 2, there are only a few surface treatment techniques that come close to substitution of the shot peen technology. These techniques, laser peening and cavity peening, are still in a phase of development and are limited to specific situations. Due to this limitation and the limit of quantity of alternatives of the shot peen technology, the fifth force cannot be considered as a threat, it is more likely an opportunity.

Table 15: Conclusion of the fifth force

4.4.6 The sixth force: Complementors As mentioned earlier, Andrew Grove, former CEO of Intel, argues that there is a forgotten force; Complementors. Complementary products are additional features that improve the quality and user-friendliness of a particular product to better satisfy customer demands. A good example of a complementary product is software applications to run machines. Strong complementors that launch attractive complementary products can boost the demand and profitability in an industry and are able to create many new opportunities to create value. When complementors are weak and are not producing attractive complementary products, it can be seen as a threat due to that it slows down growth and limits profitability. Summary of the sixth force: Complementors

Momentarily there are no complementary products that count as an additional feature to shot peen machinery, therefore no threat is formed. Still it can be a great opportunity for SIN to invent a complementary product to differentiate from competition. It gives the opportunity to create intellectual property by holding a patent on the particular innovations which indirectly contributes to the image of SIN.

Table 16: Conclusion of the sixth force

4.4.7 Summary

4.5 STEP-Analysis A STEP-Analysis has been conducted in order to get a view of the external environment of SIN. Potential harms and benefits are identified in this analysis taking the “STEP-factors” into consideration. STEP refers to; Sociocultural, Technological, Economic and Political. The matrix in (REFER FIGURE) below gives a quick indication of the findings of this analysis. The findings are applied per STEP-factor after the matrix Sociolcultural

Ethical

Corporate responsibility

Technological

R&D

Economic

Effects of the economic crisis on sales

Effects of the economic crisis on government spending

Political

JSF

Legislation

Sociocultural

Ethical The core business of SIN is the engineering, manufacturing and installation of surface treatment equipment. The equipment is sold to companies who exploit the machinery for their own purposes. SIN should take ethical issues into consideration with regards to their existing clients. It should be determined whether SIN will, indirectly, compete with these clients when establishing a JSP division.

Corporate responsibility The world population gets more caring about the planet and its environment. Companies who exceed norms and values regarding environmental issues can undergo severe times when they get condemnation of their actions. If, from an environmental point of view, inappropriate actions from a company leaks out, it can be published in the media, which can harm the reputation of the company. To show the world that they care about the planet, companies start up sustainability projects. These projects concerning solutions to the environmental issues where the particular company can be associated with. Not only among the consumer but also among companies is the importance of corporate responsibility recognized. Companies do not want to be associated with companies who harm the environment. They rather do business with companies that show commitment to our planet. Momentarily SIN does not involve sustainability projects within their processes, they neither bring exceptional harm to the environment. Still, a sustainability project does contribute to the image of the company and it might be a decisive factor for potential clients to become a client. Sustainability projects do not have to be big, neither have to cost loads of money. A simple recycling plan may already count for a sustainability project and therefore it might be beneficial for the new division to implement one or more sustainability projects.

Technological

Lack of R&D The interview with Kris Maes (REFER) was followed by a small conversation. Out of this conversation it can be concluded that MIC have fallen behind in R&D due to the utilization of old shot peen equipment. Momentarily they possess too less knowledge to engineer and manufacture new equipment. Shot peen installations located at the JSP division are momentarily far out of the league for MIC. Therefore the level of R&D should be maintained high in order to avoid circumstances currently occurring at MIC.

Economic

Effects of the economic crisis on sales For each company the current economic recession can be identified as a threat. According to Mr Maes (refer interview) the recession had great effects on the operations of MIC. Due to that shot peening is a finishing process of surface improvement, companies tend to economize on it or tend to find a cheaper substitute. According to Mr Maes, MIC lost clients with uniform components. They have found out that, on the long-term, purchasing shot peen equipment is cheaper than outsourcing due to that a lower level of technology is required in order to shot peen uniform components. Mr Maes suggested that using different types of shots can make the difference due to that equipment with the ability of using different shots is more expensive than equipment which only can use one type of shot. He also suggested that the crisis had impacts on his selling strategy. Companies want to be as effective as possible with using as less as possible resources in order to save costs. This process is called “Working LEAN”. The LEAN process can be used as an argument to recruit clients. Working with few resources involves more risk; the process of the particular company is depending on the functionality of the shot peen equipment that they possess. Therefore companies look for a back-up facility which is able to continue their business processes if malfunction of their machinery occurs.

Effects of the economic crisis on government spending Momentarily the Dutch government is cutting costs and expenses on several factors. One of the factors that they economize on is the army, to be more relevant to SIN, the Royal Air force. The government planned to substitute the jetfighter F-16 for the Joint Strike Fighter (JSF). The plans are temporarily in suspense due to that the actual cost of the JSF is significantly higher than the estimated costs. Lockheed Martin, the manufacturer of the JSF, is obliged to involve Dutch companies in their process due that the purchase is a government spending. SIN is accredited by Lockheed Martin to execute shot peen activities to components of the JSF and therefore there is a huge possibility that they will assign SIN to do the job. When the economic situation does not allow the government to purchase the JSF they will look for a different jet fighter which can cost SIN a client. (Dutchnews.nl)

Political

JSF As explained in the economic part of this analysis, the purchase of the JSF is an opportunity for the JSP division of SIN. The economic circumstances influence the decision making process of the ministers in the Dutch parliament. As long as the purchase of the JSF is depending on the plans of the Dutch parliament there will be an uncertainty for SIN. Still, all scenarios are still open (Dutchnews.nl).

Legislation The shot peen technology increases the life-time of a processed component significantly. The components come out stronger and more reliable after being shot peened. Companies shot peen components to increase quality and to gain durability but in some industries the quality and durability stands for safety. Most of the times the safety is important to vehicles, for example an airplane, the shifting pressure on the components of airplanes causes residual stress on them which could lead to critical accidents. When these components are shot peened they are able to handle the pressure for a considerably longer period of time. Due to the huge safety advantages of this technology it cannot be excluded that shot peening of particular components become a legislative requirement. Such a law could occur a positive shift in the demand curve for job shot peening.

Summary This chapter sums up external risks based on 4 factors; Sociological, Technological, Economic and Political. Each factor is evaluated and potential harms or benefits for the JSP division are identified. Potential harms and benefits that derive form the STEP factors are listed in (REF Matrix) and are further defined in this paragraph.

4.6 SWOT-Analysis

Introduction This analysis consists out of an internal and external analysis that categories each characteristic of the JSP division of SIN as a strength, weakness, opportunity or threat. This analysis will also be applied on all competitors of the JSP division in order to be able to make a reliable comparison that identifies the differences between the JSP division and its competition. The identified differences will determine whether the company has a competitive advantage or not. In order to gain or maintain competitive advantage a strategy should be developed that turns weaknesses into opportunities and opportunities into strengths. A tool to help designing this strategy is to process the founded data into a confrontation matrix. The SWOT analysis will include the results of the competition analysis, a resource-based view, the five forces model of Michael Porter and the STEP-Analysis . In (REFER SWOT table) a SWOT analysis based on the JSP division of SIN is illustrated. The SWOT analysis based on competition can be found in (REFER MIC, REFER WHEEL and REFER CTB). All SWOT factors of (REFER SWOT) will be explained and substantiated with evidence below the table. The SWOT analysis is applied according to the theory of (REFER LIT) and is based on data gathered through a case study that consists out of interviews, in-depth interviews, desk-research and observations.

Strengths

Appearance

Quality orientation

Service orientation

Reputation/references

High level of professionalism

Flexibility

Skilled staff

Website

Image of SIN

Manufacturing division of SIN

Weaknesses

Internal communication

Plant capacity

R&D department

Promotional activities

Emphasis on manufacturing

Operational scope

Number of clients

Limited approvals/certificates

Image

Website

Communication among staff of SIN Opportunities

Approvals/certificates

Joint Strike Fighter

Corporate Social Responsibility

Location of the JSP division

Product/service awareness

Affiliates and joint ventures

Threats

Product/service awareness

Economic instability

Entry of competition

Table 17: SWOT-analysis of the JSP division of SIN

4.6.1 Strengths Appearance Based on personal observations it can be concluded that appearance is a strength of SIN. A clean and representative office seems to be a priority to the directing manager. Not only the offices, but also the workplace is a clean, organized and representative space that can be presented to (potential) customers any time a day. A gardener is hired to ensure a representative exterior of the building. The office is located near the freeway and the logo of SIN is clearly visible for drivers passing by. High level of Professionalism/Reputation and References The representative appearance indicates the level of professionalism that SIN wants to live up to. Not only the appearance of the company but also the references, approvals and certificates verify their level of professionalism. With certificates such as ISO9001 and approvals from companies such as Rolls Royce and Lockheed Martin, SIN proves to be a company which guarantees flexibility, high quality and high service. This can also be concluded after analyzing in-depth interviews held among key personnel of SIN. The company aims to deliver the highest attainable quality and after-sales services (manufacturing process). The company is flexible towards customers and always try to fulfill their requirements in order to gain customer satisfaction (REFER INTERVIEWS). Skilled staff/Quality orientation/Service orientation/Flexibility Desired quality can be delivered due to the expertise of the staff. The company invests in training and education of its employees to keep them up to date with the latest developments in the market. One of the deputy directors is qualified to give training about the use and application of the shot peen technology and can therefore be considered as an expert in the field. Many employees are already employed for over 12 years+ which indicates the load of experience that flows through the company. The reputation of SIN can be essential to their JSP division and should definitely be used as a tool to recruit new clients. The references of SIN’s manufacturing division indicates the know-how and reputation of the company. Due to that SIN is a small company it is able to be flexible towards its customer, this in comparison to MIC, they are limited in flexibility due to that division managers needs to obey the rules and follow criteria of the board of directors without the right of say. Website The website of SIN gives a professional impression. It is up to date and provides the reader with relevant information about the products that they offer. The existence of the JSP division is clearly stated on the website and it is easy to get in contact with the person in charge of the division. Still, there can be worked on the content of the website with regards of the JSP division. This matter will be discussed in “weaknesses”. Manufacturing division of SIN Based on interviews, approvals and references it can be concluded that SIN has great expertise as regards the design and the manufacturing of surface treatment equipment. The manufacturing division of SIN is considered a strength not only due to its expertise but also due to their business relationships, its professionalism and its financial power. The manufacturing division should be used as a tool in client recruitment and marketing activities. Image of SIN The image of SIN is definitely a strength. The image of SIN has been derived from their reputation, references, flexibility and the delivering of high tech surface treatment equipment of high quality. Nevertheless, the image of SIN also forms a weakness. This matter will be discussed in “weaknesses”.

4.6.2 Weaknesses Internal communication According to research (REFER SWOT IVIEWS) it can be determined that internal communication is on a relatively low level. Most of the participants value the importance of this subject, in comparison with other subjects, low as well. It is much more likely to be successful when a high level of internal communication is maintained due to that collaborative, co-operative and energized workforce are willing to give their best to the particular organization (Smith). Plant capacity Based on in-depth interviews, interviews and a questionnaire it can be concluded that the majority of the key staff of SIN considers the current plant capacity as a weakness. Plant capacity is considered as a weakness due to that employees expect that running a JSP division, at full capacity, interferes with the manufacturing process of SIN. It can also be concluded that the majority is a proponent of a clear separation between the two processes(REFER INTERVIEWS). R&D Momentarily R&D is at a low level. According to the directing manager, the results of the R&D department are eminent. Still, the department is low on resources. Only one person is responsible for the department and has, next to researching and developing, the authority to execute the JSP activities and is a mechanic which is exploited when small problems occur in the facility. Every activity executed by the R&D manager can be identified as an opportunity cost for other activities. Promotional Activities Momentarily there are no ongoing promotional activities regarding the JSP Division except for continuous advertising on their website, through networking activities on fairs and meetings and through membership of the NAG (Nederlands Aerospace Group). Emphasis on Manufacturing Based on personal observations and conversations with the manager of the JSP division, it can be concluded that SIN puts more emphasis on its core business, manufacturing and installation of surface treatment equipment, than on JSP activities. The current manager of the JSP division spends, due to strategic decisions, less than 5% of its time on JSP activities. Operational Scope The operational scope of SIN (Benelux) is limited in comparison with MIC and Wheelabrator. MIC has 39 shot peen facilities whereof 20 are established in the U.S., 17 in Europe, 1 in China and 1 in Canada. Wheelabrator has 3 shot peen facilities whereof 2 are established in the U.K. and 1 is established in France. Number of Clients Based on the Break-Even analysis, which is shown later in this report, it can be determined that more clients are needed in order to break-even. Limited certificates In comparison with competition SIN falls behind when it comes to certificates. Together with CTB they only possess the certificate called ISO9001. MIC is in possession of numerous certificates: FAA, CAA, EASA, ISO9001, AS9100, QS9000 & TS16949 and NADCAP. Wheelabrator is in possession of ISO9001, NADCAP and AS9100. Mr Kris Maes has put emphasis on the importance NADCAP accreditation. According to him NADCAP accreditation had a significant influence on the sales of MIC Belgium.

Image Image is registered as a strength and as a weakness. The image which is described in “strength” will definitely be beneficial to the JSP division of SIN. The difference is that this is the image of the manufacturing division of SIN and not the image of the JSP division. In this new market SIN did not built up reputation yet either goes for image and expertise. Companies that aim to outsource JSP activities will value the image and expertise of their suppliers and this might be the decisive factor for them to become a client (KM). Website The website of SIN (www.straaltechniek.net) gives a professional impression and is indeed provided with more than sufficient information regarding their area of expertise; the production of hi-tech surface treatment equipment. The website is considered a weakness to the JSP division due to that their JSP services are not fully integrated at their website in comparison with competition. It lacks specific information which might be crucial to clients when it comes to the recruitment of clients. Communication among staff of SIN 4.6.3 Opportunities Approvals/Certificates In comparison to MIC, SIN is falling behind as regards certificates and approvals. More certificates prove the professionalism of SIN which potentially contributes to client recruitment. In table (REFER COMP ANA) the certificates and approvals of SIN and its competition are illustrated. The interview with Kris Maes indicates the importance of the certificates, he calls it a loss due to that the level professionalism of SIN is probably higher than MIC Belgium while not being NADCAP approved. Only MIC is practically unsurpassable as regards to this matter. The rest of the competition should be passable, at least it should be possible for SIN to keep up with. Accrediting certificates positively affects the image of the firm in the form of professionalism and expertise in this niche market. Location of the JSP Division The place where the JSP division is located can form an opportunity. Based on questionnaires (REFER QUEST) it can be concluded that the majority of the staff of SIN considers the plant capacity as a weakness. Based on in-depth interviews with key-staff of SIN, (COMPUTE %) 80% fears that JSP activities, activities from the rental division and installation activities will interfere with each other considering that the current growth of SIN continues and the current plant capacity remains. The results of the interview with Kris Maes indicates the importance of the location and the strategic possibilities. MIC Belgium purposely established their affiliate near (potential) clients in order to save on transportation costs. The effect of this strategic action is that clients of MIC see the ability to reduce the costs of the services.

Product/Service Awareness Based on observations of preliminary research of SIN it can be concluded that there is a low level of awareness of both SIN and the shot peen technology. The low level of awareness forms an opportunity due to that it increases the chance of hidden market potential. On the contrary, Kris Maes (REFER Intview) is not so praiseful about the JSP market. He argues that the Belgian market has lost its potential due to that companies decide to place shot peen machinery at their own plants instead of outsourcing. He predicts that it is a matter of time before MIC Belgium close its doors due to the diminution of clients. In (REFER TABLE) specific conclusions of the survey are presented. Results of a survey based on 120 companies related with the surface treatment industry

13% of the questioned companies is familiar with SIN

36% of the questioned companies is familiar with the shot peen technology

29% of the questioned companies is not familiar with the shot peen technology

From 37% of the of the questioned companies it is not known whether they are familiar with the shot peen technology.

58% is interested in further information about the shot peen technology through direct mail. Table 18: Results of preliminary research SIN (Straaltechniek International Nederland, 2011)

JSF As discussed in the STEP-Analysis, the JSF forms an opportunity to the JSP division (ref Dutch news). The purchase of the JSF is an opportunity in such a way that SIN is already approved by Lockheed Martin, the designer of the JSF, to shot peen particular components of a tool which is able to move the jet from the runway. The request of Lockheed Martin was the decisive incentive for the managing director to purchase and install shot peen equipment at the plant of SIN and therefore it should be a great gratification for SIN if the order proceeds. Affiliates and Joint Ventures Affiliates and Joint Ventures form an opportunity in the sense of scope. If the JSP Division becomes a profitable business it is possible to integrate the service in more affiliates or Joint Ventures of the Straaltechniek group. CSR Corporate Social Responsibility (CSR) is an opportunity for every company who does not apply any CSR activities. CSR can be interpreted in many ways, therefore different definitions are illustrated in (REFER FIGURE). CSR activities heavily contribute to the image of a company. Companies and consumers value the commitment to the planet, to human rights and to society. Still, the results of the “SWOT-interviews” indicate that staff of SIN ought CSR as the most unimportant subject of the interview.

Figure 15: CSR Defined (Idowu & Filho, 2009)

4.6.4 Threats Product/Service Awareness The low level of awareness forms an opportunity in the sense of hidden market potential. More clients need to be recruited in order to generate higher turnover rates. With the current level of awareness it seems hard to, annually, reach the break-even point of the JSP Division. Therefore the low level of awareness is considered a threat as well, without awareness there will be limited clients while more clients are needed in order to be profitable. Economic Instability According to Mr Maes, the financial crisis had a major impact on the sales of MIC Belgium. He stated that the company has lost clients which processed uniform components, such as gears. These clients have decided that purchasing their own equipment is more lucrative on the long-term. He also stated that the technology is a finishing process which is not required to be executed and therefore companies tend to economize on it Entry of New Competition New potential competitors who try to enter the market always form a threat to companies who already exist in the market. Therefore it should be made difficult by these companies for potential entrants to enter the market. The market size (Approximately € 2,000,000 per year) is relatively small to share with more competitors. Companies risk the chance of losing market share when allowing potentials to easily enter the market. Based on the five forces model (refer), it can be determined that there is a relative small chance that potentials enter the JSP service market.

4.6.5 Confrontation Matrix In (REFER FIG) a confrontation matrix with all the SWOT elements can be viewed. The purpose of this matrix is to lay a fundament to new strategies which convert threats into opportunities and opportunities into strengths. The ratings of the S’s and the W’s indicate the level of importance to the subjects regarding the fundament. It gives a clear indication which S’s and W’s are important in order to convert threats into opportunities and opportunities in strengths. Motivation of the ratings are defined further in (REFER TABLES).

Opportunities to Strengths Rating Motivation of Results Matrix

Approvals/Certificates 3. High Level of Prof. 2. Appearance 1. Manuf. Division of SIN

In order to acquire certificates and approvals, companies are required to execute their operational processes on a high degree of professionalism. The auditor of the particular organization visits SIN in order to verify whether SIN fulfills all the requirements. Since there is an actual visit of this auditor it is important to have a clean and organized appearance in order to pass the audit. The JSP Division can benefit from the certificates that SIN has already acquired.

JSF (Joint Strike Fighter)

3. - 2. - 1. -

Due to that this opportunity is a political decision, no significant influence can be applied in order to turn this opportunity into a strength.

CSR 3. R&D Department 2. Flexibility 1. Service Orientated

Based on the in-depth interviews (refer appendix) held among key staff of SIN, it can

be concluded that no to little inspiration flows in the company as regards possible CSR activities. Therefore R&D is important in order to design a sustainability project. The sign of commitment to society can be interpreted as a service by society, therefore flexibility and service orientation are important factors in order to realize CSR activities.

Location of the JSP Division

3. Number of clients 2. Plant capacity 1. Flexibility

If it can be identified that sufficient clients can be recruited, the location of the JSP Division becomes more essential. Staff of SIN fears problems regarding plant capacity (REF Indepth and SWOT RESULTS). Sufficient

capacity should be available in order to execute the operations of all divisions to turn the location of the JSP division into a strength. Based on the interview with Mr Maes (REFER IVIEW KM) it can be determined that, in order

to save on transportation costs, some affiliates of MIC are located next to the plant of huge companies for who it is beneficial to apply the shot peen technology to their products. Therefore flexibility (and capital) is required.

Product/Service Awareness

3. Promotional Activities 2. Reputation/References 1. Number of clients

In order to aware the market of the JSP services more promotional activities should be applied, separated from and in combination with the advertisement of the core business of SIN. The jobs executed by the JSP Division can be published as references on the website of SIN. Visitors of the website may identify that competition or similar types of companies apply JSP services on their components. Finally it is important to spread the message through existing clients. Word-to-mouth advertisement is considered to be the most convincing form of advertisement (Thorne). It is a tool that should not be forgotten, however the effectiveness depends on the number of clients that SIN possess.

Affiliates and Joint Ventures

3. - 2. - 1.-

Affiliates and Joint Ventures can become a strength to SIN when the JSP Division becomes successful. The success can be an incentive to establish a JSP Division at more affiliates of the SIN Group.

4.6.6 Summary This chapter contains a SWOT-Analysis which is based on the results of four other analyses. The SWOT factors can be viewed in the matrix in (REF TABLE). All subjects are broadly explained per factor and processed in a confrontation matrix (REF TABLE). This confrontation matrix can be viewed as a strategic framework in order to convert threats to opportunities and weaknesses to strengths. Motivation of the decisions in the matrix are explained and defined in (Refer table) and (refer table).

Threats to Opportunities Rating Motivation of Results Matrix

Product/Service awareness

3. Promotional Activities 2. Reputation/References 1. Number of clients

In order to aware the market of the JSP services more promotional activities should be applied, separated from and in combination with the advertisement of the core business of SIN. The jobs executed by the JSP Division can be published as references on the website of SIN. Visitors of the website may identify that competition or similar types of companies apply JSP services on their components. Finally it is important to spread the message through existing clients. Word-to-mouth advertisement is considered to be the most convincing form of advertisement (Thorne). It is a tool that should not be forgotten, however the effectiveness depends on the number of clients that SIN possess.

Economic Instability 3. Flexibility 2. High Level of Prof. 1. Reputation/References

Flexibility equals “fulfilling customer needs” and can be a significant characteristic as regards surviving in economic instable times. In a recession, economizing companies want to reduce risk as much as possible. A high degree of professionalism and good references can be identified as insurance by potential clients. Still, it should not be forgotten that price also plays a role.

Entry of Competition 3. R&D Department 2. Skilled Staff 1. High Level of Prof.

Based on the theory of the five forces model (Hill en Jones) it can be determined that innovation, scarce resources and an integrated professional image withhold potential new entrants from entering a new market.

5. Financial Analysis of the JSP Division 5.1 Break-Even Analysis In order to determine whether it is economic feasible to establish a JSP division, the yearly break-even point is calculated. The calculation indicates all costs and the maximum profit that can be attained. The outcome of the analysis shows how many jobs need to be sold and how much turnover needs to be generated in order to break-even. The data used has been gathered from company documents and has to remain classified. Required Data Turnover at full capacity Total fixed costs Total variable costs

Break-even analysis In order to determine whether it is economic feasible to establish a JSP division, the yearly break-even point is calculated. The calculation indicates all costs and the maximum profit that can be attained. The outcome of the analysis shows how many jobs need to be sold and how much turnover needs to be generated in order to break-even. The data used has been gathered from company documents and has to remain classified. Required data Turnover at full capacity Fixed costs Variable costs

Maximum attainable turnover (full capacity) In Figure 16 figure)the revenue line has been drawn. The revenue line indicates the maximum attainable turnover when operating at full capacity. In order to compute the maximum turnover of the JSP division the following formula has been applied: Amount of working days per year X 8 working hours a day = total working hours per year. Total working hours a year/ Average hours per job = Maximum attainable jobs. Maximum attainable jobs X average price per job = Maximum attainable turnover 254 working days per year – 24 days off = 230 working days per year 230 working days per year X 8 working hours a day = 1840 hours a year 1840 hours per year / 9.5 hours per job = 193 jobs per year 193 jobs a year X €1,875 = € 361,875,00 maximum attainable turnover per year

Figure 16: Illustration of the Total Revenue Line

Fixed costs

Rent of building In order to compute the rent of the JSP division the following formula is applied: Size of JSP division in m²/size of building in m² = percentage. Percentage x annual rent of the building = rent for JSP division.

154m²/2200m² = 7% 7%x€180,000 = €12,500 per year

Depreciation SIN applies the straight-line depreciation method with an estimated useful life of 5 years. In order to calculate the annual depreciation the following formula is applied: Cost of asset – residual value/5 = annual depreciable amount

Asset Cost of Asset Residual value Annual Deprec. Amount

End

Robotic Peener

€ 220,000 € 110,000 /5 € 22,000

2013

Thumbler € 21,000 € 6,000 /5 € 3000

2016

Skiff € 3,856 € 1,000 /5 € 571,20

2016

Car of salesman € 29,717 € 13,000 /5 € 3,343,40

-

Total € 274,573 € 130,000 /5 € 28,914,60

Table 19: Depreciated amount per year

€ 0,00

€ 50.000,00

€ 100.000,00

€ 150.000,00

€ 200.000,00

€ 250.000,00

€ 300.000,00

€ 350.000,00

€ 400.000,00

0 jobs 32 jobs 64 jobs 96 jobs 129 jobs 161 jobs 193 jobs

Total Rev. Line

Total Rev. Line

Labor Momentarily there are two employees directly related to the JSP division. One operator and one salesman. The labor hours of the operator depends on the quantity of JSP orders and therefore is considered as a variable cost. Next to executing JSP activities, this operator is fully responsible for the R&D department of the company . The sales manager is hired in order to recruit clients for JSP activities. However, the sales manager also has other responsibilities and therefore he is only able to use 20% of his time for JSP activities. This 20% of time can be considered as a fixed cost of the JSP division. The fixed labor costs of the JSP division will be determined with the following formula: Gross annual wage of the sales manager x 20% = Fixed labor cost of JSP division € 59,616 X 20% = € 11,923,20

Due to that assets are depreciated in the years 2013 and 2014 a change in fixed cost occurs. The changes in these costs can be viewed in (Refer table 2013), (refer table 2014) and (refer table 2017). The data in these tables will be applied to the scenarios of the sales forecasts later in this chapter. Cost activity Annual fixed costs

Rent of building € 12,500,00

Depreciation € 28,914,60

Labor € 11,923,20

Total € 53,337,85

Table 20: Current fixed costs of the JSP division 2013.

Cost activity Annual fixed costs

Rent of building € 12,500,00

Depreciation € 6,914,60

Labor € 11,923,20

Total € 31,337,60

Table 21: Fixed costs of the JSP Division 2014

Cost activity Annual fixed costs

Rent of building € 12,500,00

Depreciation € 3,343,40

Labor € 11,923,00

Total € 27,766,40

Table 22: Fixed costs of the JSP Division 2017

In (REFER TABLE) a fixed cost line has been drawn. The fixed cost line indicates the point from whereof the variable cost line should be drawn. The point where the variable cost line will cross the revenue line indicates the required turnover in order to break-even. The variable costs will be calculated based on company documents and has to remain classified.

Figure 17: The Fixed Costs Line determines the starting point of the Total Cost Line

Variable costs In order to complete the break-even analysis, variable cost per job needs to be applied to the graph. The applied variable costs represent the total cost line of the JSP division. The intersection (REF GRAPH) of the total cost line and the total revenue line represents the break-even point. The variable costs are illustrated in (refer table) stated at the end of this paragraph. The limitation of the calculation of the variable costs is (a small margin of) inaccuracy. It is impossible to precisely calculate the costs due to the following factors: Limitations

Material (media) is recyclable and durable. Costs are relatively low and no accurate registration has been made. Therefore the material cost per unit are based on a reliable estimation based on the observation of company documents.

Due to that different equipment is applied per job, the usage of energy per job cannot precisely be determined. Therefore the energy costs are based on the usage of the robotic shot peener.

Every job is different, price depends on the type of component not on the quantity. Still, the unit price calculation is based on an average selling price of the total amount of jobs between 2010 and 2013 (Refer appendix)

In order to counter these limitations, the variable costs are determined by computing an average of the total variable costs of 2010, 2011 and 2012.

€ 0,00

€ 50.000,00

€ 100.000,00

€ 150.000,00

€ 200.000,00

€ 250.000,00

€ 300.000,00

€ 350.000,00

€ 400.000,00

0 jobs 32 jobs 64 jobs 96 jobs 129 jobs 161 jobs 193 jobs

Total Rev. Line

Fixed Cost Line

Administration In order to compute the administration costs per job the following formula has been applied: Turnover JSP year Y / Turnover SIN year Y X Total administration costs SIN = Annual administration costs JSP division. 2010 € 48,077 / 1,810,000 = 2,66% X € 18,500 = € 492,10 per year 2011 € 21,284 / 1,981,000 = 1.07% X € 18,500 = € 197,95 per year 2012 € 58,170 / 2,442,000 = 2,38% X € 18,500 = € 440,30 per year Annual administration costs JSP division year 2010, 2011 and 2012 / total jobs sold = Average administration cost per job.

€ 1,130,35 / 64 jobs = € 17,65 administration costs per job

Energy In order to make a reliable calculation of the costs of energy per job the following formula has been applied: Time (in hours) per job X quantity of kw/H = kw per job X price per kw/H = Costs of energy per job Costs of energy per job X Average Q of jobs per year = Average annual energy costs 9,5 hours per job X 18 kw/H = 171 kw per job X 0,12 cents = €20,52 per job €20,52 per job X 21.33 jobs per year = € 437,69,00 per year

Material Due to that the material (media) used for JSP activities can be recycled numerous times it is hard to estimate the costs of material. The shot peen media is also a product that SIN sells to its customers, the media is always on stock and is available in order to execute JSP activities. This makes it hard to make a precise estimation since not all the used media is registered. Still, based on the ledgers of the JSP division, it can be assumed that approximately € 1,500 in material has been used in order to execute JSP activities since 2010. In order to make a reliable calculation of the costs of material per job the following formula has been applied: Total estimated material costs 2010, 2011 and 2012 / total amount of jobs 2010, 2011 and 2012 = costs of material per job.

€ 1,500 / 64 jobs = € 23,43

Maintenance After studying the ledgers of the JSP division of SIN the costs of maintenance per job can be calculated. In order to make a reliable calculation of these costs the following formula has been applied: Total maintenance costs 2010, 2011 and 2012 / total amount of jobs 2010, 2011 and 2012 = average maintenance cost per job Total maintenance costs 2010, 2011 and 2012 / 3 years = average annual maintenance costs

€ 18,496 / 64 jobs = € 289,00 per job

Labor Labor can be defined as a variable due to that the operator of the JSP Division only generates costs when executing JSP activities. The operator is responsible for the R&D department and can be exploited as a mechanic as well, therefore remaining working hours will be fulfilled doing R&D activities or activities as a mechanic. Gross wage of operator / 12 months = Monthly gross wage Monthly gross wage /160 working hours a month = Hourly wage rate (€1901) Hourly wage rate X Average hours per job = Labor cost per job (€180,70) € 36,515 / 12 = € 3,042,92 € 3,0422,92 / 160 hours per month = € 19,01 €19,01 X 9.5 hours per job (average) = €180,70

In (REFER TABLE) the variable costs per year and per job can be viewed. The variable costs per job is applied to the total cost line and is processed in (Ref graph). The total cost line starts at the fixed cost line. The point where the total cost line intersects with the total revenue line can be identified as the break-even point. The break-even point can be defined as the point where operating income equals 0. Cost Activity Annual Costs Costs per Job

Administration € 376,76 € 17,65 Energy € 437,69 € 20,52 Material € 500,00 € 23,43 Maintenance € 6,165,33 € 276,05

Labor € 3,854,33 € 180,70 Total € 11,334,11 € 531.37

Table 23: Current variable costs of the JSP division

The analysis gives a clear indication of the quantity of jobs needed in order to break-even, it also indicates the amount of turnover needed in order to break-even. This data can be essential to determine desired occupancy rates, which can be used to determine whether extra staff needs to be hired or not.

Figure 18: Break-even analysis of the JSP division based on the costs of 2013.

0 jobs 32 jobs 64 jobs 96 jobs 129 jobs 161 jobs 193 jobs

Total Rev. Line € 0,00 € 60.312,5 € 120.625, € 180.937, € 241.250, € 301.562, € 361.875,

Fixed Cost Line € 53.337,8 € 53.337,8 € 53.337,8 € 53.337,8 € 53.337,8 € 53.337,8 € 53.337,8

Total Cost Line € 53.337,8 € 70.341,6 € 87.344,6 € 104.349, € 121.884, € 138.888, € 155.892,

€ 0,00

€ 50.000,00

€ 100.000,00

€ 150.000,00

€ 200.000,00

€ 250.000,00

€ 300.000,00

€ 350.000,00

€ 400.000,00

Re

ven

ue

/exp

en

ses

Total jobs (annual)

Break-even Analysis JSP division

The analysis gives a clear indication of the quantity of jobs needed in order to break-even, it also indicates the amount of turnover needed in order to break-even. This data can be essential to determine desired occupancy rates, which can be used to determine whether extra staff needs to be hired or not. Contribution margin The variable costs per job is estimated on € 531,37. The selling price per job is estimated on €1875,-. In order to determine the contribution margin per job the following formula has been applied: Sales price per job – Variable costs per job = contribution margin per job Contribution margin per job / selling price per job = contribution margin in % € 1,875 - € 531,37 = € 1,343,63 contribution margin per job € 1,343,63 / € 1,875 = 71.66% contribution margin per job

The outcome of the calculation indicates that 71.66% of the sales price can be used to cover fixed costs and other expenses. When the break-even point has been reached, € 0,71 cents per incoming dollar can be accumulated to operating profit. The contribution margin in capital is approximately € 1,343,63,- per job. In (REFER BE ANA) the break-even point is determined. In order to precisely calculate the number of jobs that need to be sold and the yearly turnover rates in order to break-even, the following calculation have been applied: Fixed costs / Contribution margin per job (in €) = Sales volume (in units)

€ 53,337 / € 1,343,63 = 39.71 40 jobs per year in order to break-even

Fixed costs / Contribution margin ratio = Sales volume (in €)

€ 53,337 / 71.66% = € 74,430 in order to break-even

The previous calculations shows that approximately 40 jobs per year are needed in order to earn the targeted operating income, in capital, a turnover of € 74,430,00,- should be generated in order to earn the targeted operating income. Summary This chapter gives insight in all costs involved regarding the JSP division. These costs are, together with the maximum attainable turnover, used in order to determine the break-even point (REFER GRAPH). Based on the average price of a job, each job has a contribution margin ratio of approximately 71,66%. Approximately 40 jobs per year will comply in order to break-even. 40 jobs per year is equal to an annual turnover of approximately € 75,000,-.

5.2 Sales Forecast in the Form of Scenarios In order to measure economic feasibility of the establishment of a JSP division at SIN a sales forecast has been designed. The sales prediction consists out of 3 scenarios; a pessimistic, a realistic and an optimistic scenario. The prediction is based on all data gathered for this inquiry and is processed in a table in order to give a clear overview of the expected sales. The forecast is estimated until the year 2018 and will be within the boundaries of reality. 5.2.1 Market Size Indication Due to hidden market potential and based on an estimation of Mr Maes (REF INTERVIEW) the market size has been indicated. Based on the assumption of Mr Maes, MIC generated approximately € 900,000 a year and mentioned that the Belgian market was already utilized. Taking the geographical size of Belgium into consideration it is safe to assume that the Dutch market can generate at least € 1,100,000 annually as regards JSP activities, considering a possession of 100% market share. The market size of the Netherlands and Belgium in Euros can safely be estimated on € 2,000,000 a year. The maximum attainable turnover of € 399,375,- per year equals approximately 20% of the market size. 5.2.2 Pessimistic Sales Scenario 5.2.3 Realistic Sales Forecast 5.2.4 Opportunistic Sales Forecast

Chapter 6 Conclusions Introduction Conclusions are drawn according to the fishbone diagram (REFER FISHI). The conclusions are drawn based on the applied theories which are substantiated by preliminary research, desk research, personal observations, interviews, in-depth interviews and the analysis of company documents. It needs to be stated that some subjects in the fishbone diagram proved to be irrelevant in order to achieve the research goal. The goal of this inquiry is to measure the economic feasibility of offering JSP services. The conclusions are processed in (refer table) which can be viewed in Chapter 6.1 6.1 Conclusions per Subject Marketing and Sales

Based on preliminary research, desk research and in-depth interviews it can be concluded that direct competition is identified and evaluated into a competition analysis. This analysis involves the following conclusions:

Metal Improvement Company (MIC), Wheelabrator Group and CTB are the direct competitors of the JSP Division of SIN.

MIC is the biggest competitor to the JSP Divisions taking into considerations its financial power, its size, operational scope and certificates and approvals.

Wheelabrator is a more direct competitor than MIC taking into consideration that Wheelabrator and SIN sharing the same core business; the design, manufacturing and installation of surface treatment equipment..

All direct competitors offer other surface treatment services in order to diversify.

According to Mr. Kris Maes (REFER), NADCAP accreditation contributes significantly to

client recruitment of JSP orders.

There is a market for the offering of JSP services (REFER KM).

JSP services are less integrated and detailed on SIN’s website than on the websites of MIC

and Wheelabrator.

Based on interviews and personal observations, a resource-based (RBV) view is applied. Based on the RBV it can be concluded that, except for the rental division, all resources that SIN possess are possessed by at least one competitor.

The Rental Division of SIN cannot be identified as an competitive advantage due to that it is not hard to acquire for other companies. Next to that it has different competitors and is situated in a different market than the JSP Division and its competitors.

Based on the findings of the RBV it can be concluded that the JSP Division of SIN does not possess resources which creates a competitive advantage over its competition.

Marketing and Sales (Continuation)

Based on interviews, in-depth interviews, desk research and personal observations, the five forces model has been applied. The general conclusion of this analysis is that the competitive force is relatively weak.

Based on the findings of the five forces model it can be concluded that:

There is a moderate risk of new entrants in this industry

There is relatively a high level of intensity among rivals

There is little bargaining power involved from buyers

Suppliers of JSP services possess a relatively high level of bargaining power

There are no to little substitutes

No complementary goods can be applied to the shot peen technology.

Based on interviews and in-depth interviews a STEP-Analysis has been designed. Based on the STEP-Analysis it can be concluded that there are several external opportunities and threats which can potentially harm or benefit the JSP Division.

A SWOT-Analysis has been applied. Based on the Competition Analysis, the Resource-Based View, the STEP-Analysis, the Five Force Model, interviews (REFER APPENDIX), in-depth interviews (REFER APPENDIX) and personal observations, the SWOT-Factors (Strenghts, Weaknesses, Opportunities and

Threats) in the SWOT-Analysis are concluded.

Based on in-depth interviews among key-personnel of SIN, it can be concluded that there are different opinions about the distribution of commercial information through social media and implementation of a social media button on the website of SIN.

Based on an in-depth interview with the former division manager of MIC (REFER KM) it can be

concluded that the Belgian market size in €, with regards to JSP activities, is approximately € 900,000 per year.

Based on the data provided by the former division manager of MIC (refer km) an estimation has been

made. Taking country size into consideration it can be concluded that it is safe to assume that the total market size of the Benelux is at least € 2,000,000 per year.

Based on interviews and in-depth interviews (REFER) it can be concluded that the degree of awareness

of the shot peen technology is relatively low.

Based on personal observations, analyzing existing sales data, interviews and in-depth interviews (REFER) it can be concluded that the potential customers are situated in the aerospace, automotive,

architectural and industrial industry.

Based on the observation of existing sales data it can be concluded that the average price per job is approximately € 1,875,-.

Based on preliminary research, desk research, personal observations, interviews, in-depth interviews and the analysis of company documents a sales forecast has been written. Out of this forecast it can be concluded that, more commitment to and more promotional activities for the JSP Division contribute to the market growth of the division.

Operational Activities

Based on the analysis of ledgers of balance sheets, existing sales data and other company documents, it can be concluded that precise costs and numbers are nearly impossible to calculate due to the factors stated in (REFER SUB-TABLE) and therefore calculations are based on an

average.

Bas

Based on the analysis of ledgers in balance sheets, existing sales data and other company documents, it can be concluded that all costs necessary, stated in (refer fishi), in order to measure

economic feasibility of JSP services are determined.

Based on interviews with key-personnel of SIN (REFER APPENDIX), it can be concluded that

transportation costs are accounted to the particular client.

The differences in price per unit

The differences in order size

The diversity of material applied

The unknown durability of the shot peen media

Lack of data regarding processing time per job

An assessed percentage of commitment (REF Interviews).

Investment

Based on interviews and in-depth interviews (REFER) it can be concluded which assets are required in

order to operate the JSP Division.

Based on the analysis of ledgers of balance sheets, existing sales data and other company documents, it can be concluded that the JSP Division is financed through a private investment.

Based on interviews (Refer) it can be concluded that the private investment does not involve losses as

regard interest costs.

Based on interviews (refer) it can be concluded that a straight-line depreciation method is applied on

SIN’s assets and that these assets depreciate in five years.

Economic feasibility of offering JSP services

In order to measure the economic feasibility of offering JSP services a Break-Even Analysis has been made according to the current costs, rate of commitment and capacity. All costs and financial data gathered has been used in order to complete this analysis. Out of this analysis it can be concluded that:

A maximum of 20% market share can be obtained taking the current plant capacity into consideration.

Operating at full capacity yields in € 399,375,- per year.

The JSP Division is far below the break-even point.

Approximately 40 jobs per year are needed in order to break-even considering the stated

rate of commitment, costs and activities.

An amount of approximately € 75,000,- of turnover needs to be generated in order to break-even considering the stated rate of commitment, costs and activities.

Each job has a contribution margin of approximately 71.66%.

In order to measure the economic feasibility of offering JSP services, a sales forecast has been designed consisting out of three different scenario’s; a pessimistic, a realistic and an optimistic scenario. The scenarios are based on all findings of the conducted case study. It can be concluded that more commitment to the JSP Division is beneficial to its market growth. The degree of awareness should increase when the availability of JSP services is more (specifically) promoted. It can be concluded that, under realistic circumstances, the break-even point will be reached somewhere around 2018.

Based on an interview with the managing director of SIN (Refer) and an in-depth interview with the former division manager of MIC (REFER), it can be concluded that the JSP Division adds more value to

the company than economic value. The division can be utilized for R&D purposes, as a back-up for clients of equipment and as tool to train younger employees.

Based on personal observations and interviews it can be concluded that the degree of commitment to the JSP Division is too little.

Based on personal observations and interviews it can be concluded that the JSP Division carries secondary values.

Based on all the findings of- and all the theories applied on this inquiry it can be concluded that, with an increased rate of commitment, the JSP Division is economic feasible. It is safe to assume that it takes time before the break-even point will be reached.

6.2 Overall conclusion Based on the conducted case study several conclusions are drawn (Refer tables). In general, it can be concluded that the JSP Division is, theoretically, economic feasible. It should not be expected that huge profits flow from the JSP Division. In order to motivate this conclusion a small table has been processed, see (refer), which motivates why huge profits should not be expected.

Total estimated market size is assessed at € 2,000,000.

Under current circumstances approximately 20% of the total market share can be obtained.

There is a relatively low level of awareness.

The current economic instability withholds companies from applying finishing treatments such as shot peening on their components.

The low rate of commitment (from SIN) to the JSP Division

No NADCAP accreditation

Competition with MIC Sint-Truijden, according to Mr. Kris Maes the Belgian market is utilized by MIC.

It requires more commitment to realize the break-even point and even more in order to realize profit. Still, the JSP Division creates more value than economic value, other added values are:

The JSP Division can be utilized for R&D purposes.

The JSP Division can be offered as a back-up for clients who purchase shot peen equipment.

The JSP Division can be used as a tool to pass down knowledge from younger to older employees.

These added values are taken into consideration in the Recommendations of this thesis. Furthermore it can be concluded that SIN does not possess a competitive advantage over its competitors, there are internal and external factors that can potentially harm or benefit the JSP Division and according to the Five Forces model of Porter it can be concluded that there is a low competitive force which can be identified as an opportunity to SIN. All information gathered is processed into a SWOT-Analysis which is summarized in a confrontation matrix that provides SIN with a fundament for designing a strategy to turn threats into opportunities and opportunities into strenghts.

Chapter 7 Recommendations and Strategic Implementation Introduction This chapter consists out of the recommendation and the strategic implementation of the results of the inquiry. The chapter is structured according to (REFER FISHI2) and is based on the drawn conclusions in Chapter 6: Conclusions. Each recommendation is followed by an option of how to implement the advisement, this can be considered as the strategic implementation. Short-term Recommendation : The re-launch of the JSP Division It is recommended to re-launch the JSP Division. Based on this inquiry it can be concluded that the degree of commitment is too little. Therefore it is advised to SIN to become more committed to the JSP Division in order to utilize its potential benefits. Momentarily the current division manager has been asked to execute different tasks within SIN. In order to reach the full potential of the division, awareness needs to be created, strategies need to be designed, research needs to be conducted, more clients need to be recruited and relationships with clients need to be maintained. The current JSP Division manager should be put back in charge and his current proceedings need to be divided among other managers. Eventually, if it appears to be that this manager performs at his current function, a new employee that is innovative, creative, committed and has the ability to manage a division needs to be hired in order to reach its full potential. The risk of this recommendation is the risk of failure which can cause partial loss of investment. Additional costs: 1 FTE Manager. Approximately € 59,616,00 annually. Recommendation: Utilization of the secondary values Hereby it is recommended to utilize the secondary values, other than economic value, that the JSP Division carries. Based on the findings of this case study, the division involves secondary values. These values are intangible values such as services, capabilities and opportunities. To be more specific these potentials are illustrated in (REF TABLE). The risk of this recommendation is the success of the division. The success of the division reduces the availability of the equipment which is required for two of the three secondary values. Secondary Values of the JSP Division

The JSP Division has the potential to be exploited for R&D purposes

The JSP Division has the potential to be offered as a back-up service for clients of shot peen equipment.

The JSP Division has the potential to be used as a tool in order to pass down knowledge from older to younger employees.

In order to realize the utilization of these values, the responsibilities of the R&D manager should be narrowed down. Momentarily the R&D manager is responsible for executing JSP activities as well, besides of that he is exploited as a mechanic. Some other employee should take over one of his responsibilities in order to utilize this opportunity. A high level of internal communication is required between the R&D department and the engineer department in order to stimulate the implementation of new developments. New developments makes SIN a specialist among shot peen technologists which can be recognized by potential clients. Additional costs: Option 1: It involves a shift in the distribution of proceedings of employees. Approximately € 0,00. Option 2: A new mechanic/operator should be hired. Approximately € 36,515,00 annually

In order to differentiate, the JSP Division should be used in selling strategies. According to Mr Maes (REF INTER) there is need for back up for companies owning shot peen machinery. The JSP Division can be used as an additional service that provides clients with a back-up option. Mr Maes mentioned that SIN has the advantage when it comes to this; the installation and manufacturing division possess a client base with companies owning shot peen equipment. Therefore all existing clients should be informed about the JSP Division and the option of back-up in order to aware potential clients. Additional costs: Due to the different options of communication the additional costs can vary between € 0,00 (communication through E-mail) and approximately € 500,00,- (communication through sending folders). Thirdly, due to that SIN is a specialized company, internal knowledge can be identified as a valuable asset. Therefore knowledge should be passed down from generation to generation. Momentarily there are some jubilees who are already employed at SIN for over 20 years and start to age. Still, they possess a considerable amount of knowledge that needs to be passed down to the younger generations. SIN’s employees are expected to be flexible when it comes to being send abroad in order to repair equipment. There will be a point where older employees finding difficulties in bringing it up to travel such distances. Therefore the assets of the division can be exploited as practicing tool for the new generation of employees. Additional costs: Option 1: An existing employee is trained by a jubilee assuming that it does not interfere with SIN’s operational processes. Approximately € 0,00. Option 2: A new employee (Part-time or FTE) is hired in order to cover the work while the other employee undergoes training. Approximately between € 0,00 and € 36,515,00. Recommendation : Increase the degree of awareness Based on the findings of this inquiry it can be concluded that there is a low level of awareness of the shot peen technology. In order to increase or to create awareness, scientific proven theories should be applied as a fundament. For example, the AIDA model. The AIDA model stands for Awareness, Interest, Desire and Action. The core of this theory is to create awareness and lead potential clients into action/purchase (Clemente, 2002). An applied example is illustrated in (refer appendix). In order to increase the awareness of the shot peen technology more attention should be paid to promotional activities. These activities should primary be focused on the JSP Division. In order to aware, advertisements should be published in magazines of targeted industries instead of “The Shotpeener” or the “MFN” (these people are already aware of the shot peen technology). Examples of these target industries are, for example, the automotive and the aerospace industry. Through SIN, companies become acquainted with the technology. Therefore it is likely that SIN will be identified as one of the founders of the technology. As mentioned before, all existing clients, who have ever purchased shot peen equipment should be informed. The risk of this recommendation is that the promotional campaign does not reach the expected potential. The effect would be a failed campaign which can have serious impact on the profitability of he JSP Division. Additional costs: € 3,800 Considering the cost of current advertisement in the magazines “the MFN” and “the Shotpeener” it is safe to assume that annual advertisement costs is approximately between € 1,090 and € 2,700 per magazine. It is assumed to advertise in two different business magazines than these two. Therefore it can be assumed that approximately € 3,800 per year needs to be realized in order to apply this recommendation.

Recommendation: Apply a cost control system A huge limitation of this research is the lack of accuracy of particular data regarding the JSP Division. For example, it is not registered how much material is used for operational activities of the JSP Division. The shot peen media (shots) are durable, not costly and are on stock in the working place. Due to these characteristics it is considered “not worth mentioning/registering”. Therefore precise costs are unable to calculate. Also the average hours per job is based on a little amount of data but is essential in computing, for example, a break-even analysis. Due to that SIN operates in three divisions it is recommended to apply a variant of the ABC-Method (Williams, Haka, Bettner, & Carcello, 2009). This method is designed in order to control and identify overhead costs. Still, the principles of the method involves registration of costs per activity. Which is principally needed in order to increase accuracy of financial data. The ABC-Method can be compared with the process of a holding; all costs per division should be registered as they are separate. Applying this creates the ability to identify problems or success per division in one glance. The risk of this recommendation is that, the increasing number of pools is odd and therefore can be misinterpreted which can result in errors in product cost measurement (Datar S. M. and Gupta M., 1994). Additional costs: Approximately € 0,00. In order to apply this recommendation, internal changes need to be made. These changes are not significant in size that it involves costs that are “worth mentioning”. Internal changes consist out of changes in the administration and documentation of characteristics of JSP orders. Mid-term Recommendation : NADCAP accreditation According to Mr Maes (REF Interview) NADCAP accreditation contributes significantly to the recruitment of new clients. Therefore it is recommended to acquire the NADCAP certificate for surface treatments. Mr Maes argues that, companies value NADCAP accreditation due to that it indicates the level of professionalism that a company applies to its operations. On top of that, Wheelabrator is also NADCAP accredited. As stated in the conclusion, Wheelabrator and SIN are similar companies and therefore it is essential to not fall behind on them. Why? due to that SIN and Wheelabrator share the same core business. Profits from the JSP Division can be seen as additional earnings and direct competition of the JSP Division is less important to SIN. The risk of this recommendation is the process of acquiring the certificate and retaining the certificate. Being NADCAP accredited involves mutations in operational processes in order to achieve the certificate. It also involves periodic audits in order to maintain the possession of the certificate. These audits cost money and involves the possibility of withdrawal of the certificate. Additional costs: ASK PADRE

Recommendation : Improve internal communication According to the results of interviews held among key-personnel of SIN it can be concluded that internal communication is a weakness of the company. Internal communication is important due to the possession of three different divisions. The three divisions should maintain a high level of internal communication in order to understand each other’s capabilities. “A collaborative, co-operative and energized workforce are willing to give their best to the particular organization. Therefore it is more likely that a collaborative workforce is more successful” (Smith). It is recommended to create more interaction between the three divisions in order to tackle potential opportunities. Progress, turnover, selling strategies and remarkable events should be reported by and among the responsibles of the three divisions. Additional costs: A fixed meeting per two weeks will do. Assuming that the meeting takes 1.5 hours and consists out of three FTE managers. Additional (annual) costs are estimated on approximately € 1,100. Recommendation : Evaluate plant capacity Based on the results of interviews and in-depth interviews (refer) held among key-personnel of SIN, it can be concluded that the majority doubts the current plant capacity in combination with the division(s). They fear that, with the current growth of SIN, the operations of the divisions will interfere with each other taking the current plant capacity into consideration. Therefore it is recommended to evaluate the current plant capacity and determine whether plans to expand or to relocate should be made. Momentarily no significant risk can be identified regarding this recommendation. Additional costs: The evaluation consist out of meetings and floorwork of the division managers. In the meetings, different kind of forecasts and the necessary plant capacity are discussed. If there can be spoke of sustainable growth of all the divisions a likely forecast should be made which indicates the moment when over capacity occurs. In the end there should be anticipated (or not) on the conclusion of this forecast. The fixed meetings of the previous recommendation can be used to discuss this purpose. Due to that the meeting in the previous recommendation already covers the costs of this recommendation, it will approximately cost € 0,00. Long-term Recommendation : Entry of Competition: According to the five forces model of Michael Porter it can be concluded that there is a moderate risk of new entrants. This is positive to the JSP Division of SIN due to that market share can be obtained more easily with less competition. This advantage is valuable and directly related to profit. Therefore it is recommended to maintain this position by studying the applied five forces model (REFER CHAPTER) and anticipate on the market changes. Additional costs:

Recommendation : A facility on a strategic location If the JSP Division becomes profitable and is totally integrated in the company it is recommended to think about the establishment of a new facility on a strategic location in order to expand the operational scope or in order to contract clients with huge orders. Facilities of MIC are located in areas which are surrounded by their target group in order to reduce transportation costs of the components (REFER KM). This facility can also be based on one client and at the location of that particular client by installing shot peen equipment at their plant. The risk of this recommendation is an opportunity to the manufacturing division of SIN. The company might be inspired to purchase shot peen equipment and apply the theory by themselves. The JSP Division risks to lose a facility, the manufacture division may be contracted to produce shot peen equipment.

Appendices