.
Introduction
In this business management report at first, a critical assessment of the relevant competitive advantage of Thermax will be discussed in detail. Three significant issues that the company faces will be identified (Sholihah et al. 2019, p. 367). To counter those identified issues, a strategic proposal will be developed and recommended to the company. Any likely impact of the proposal on involved stakeholders of Thermax Ltd Company will also be explained briefly. In defense of the recommended proposal. The significance and importance of the proposal will also be highlighted to outline the necessity of its implementation into the operations management of Thermax Ltd Company.
The competitive advantage of Thermax Ltd
Though the company has been facing many issues in recent times in its operations management and presence of extreme competition in the market, Thermax Ltd has been able to develop some competitive advantage over its current competitors due to the incorporation of some effective techniques and strategies (Ciani and Vörös, 2020, p. 87). Some of the competitive advantages that the Thermax Ltd company has over its opponents have been explained in detail below to develop a better understanding of the current position of the Thermax Ltd company in the existing concerned market of the Engineering industry.
Effective marketing Technique
The Thermax Ltd company has adopted some effective marketing techniques for the promotion of their services. For this, the Thermax Ltd company has primarily targeted the social issues prevalent in the market which they try to point out and address through their product and services. The Thermax Ltd company organizes campaigns frequently that deal with these issues such as environmental stability and energy saving (Flores et al. 2020, p. 921). The marketing technique is undertaken by Thermax Ltd helps them in offering the best quality of services to society. With the help of these campaigns, the Thermax Ltd company was able to instill into the minds of the customers that their products and services are environmentally friendly and energy-efficient which other competitor companies do not have.
This effective marketing technique of Thermax Ltd gives the company a great competitive advantage over its rivals.
Incorporation of latest technologies
Based on the analysis of the technological factor of PEST analysis it has been identified the Thermax Ltd company has been able to incorporate the latest technological advancements into its operation policy (Sakál and Hrdinová, 2016, p. 57). Through the utilisation of these latest technologies, the company has significantly maintained its competitive advantage in the heat and energy industry. The company has also incorporated innovations such as components with artificial intelligence technology, automated tools, and equipment in the production and manufacturing sector.
Competitive pricing
The analysis of PEST has helped Thermax Ltd in implementing many cost-cutting techniques and removing unnecessary business operations, the company was able to reduce the pricing of its products and services considerably. Thermax Ltd achieved competitive advantages while using automated equipment and tools that help the company in this cost-cutting strategy (Church, 2018, p. 32). The implementation of automated tools and equipment in the manufacturing and production sector of the company significantly reduced the costs of payment of its employees or human resources. Many operations were substituted and replaced with machine handling which also increased efficiency and minimized the risk and helped Thermax Ltd to achieve a competitive pricing strategy.
Purchasing in Bulk from suppliers
Based on the analysis of porter’s five forces model it has been noticed that while other companies kept changing their supplier source, the Thermax Ltd Company persisted with some specific suppliers. This developed a good bond between the existing suppliers and the company. They made all their deals with suppliers on a contract basis which assured the suppliers of continuous business relations with the company for a certain period (Ghosh and Lever, 2020, p. 71). Since there are very limited suppliers in the concerned sector, Thermax Ltd has developed a good bond with the available suppliers to maintain a continuous supply of required business resources.
Human resource management
The PEST analysis has also explained the social-cultural responsiveness of Thermax Ltd towards the employees of the organisation. The Thermax Ltd Company also organises sessions regularly for motivating an available lot of employees to get the best output of work from them which is productive and of the desired efficiency. To ensure the mental health and wellbeing of the employees, they are provided with regular mental health sessions from experts. For this, the company ensures job satisfaction by paying a good salary which is a little more than the industry standards (López et al. 2020, p. 233). There is no deficiency of leaders at Thermax Ltd Company as all the important individuals are trained to be capable of taking any leadership roles in times of crisis if any such need arises.
Employment of skilled labor
The company employs only those employees who are experts in their field of concerned industry who can deliver excellence and perfection. All the employees are skilled enough to carry out any operation required in the manufacturing and production sector (Correia et al. 2020, p. 8). To make sure that the work does not get affected due to the absence of a project coordinator, a team of expertly skilled labor is distributed at each operation point.
Identified issues
Apart from the above-mentioned competitive advantage, the Thermax Ltd Company also faces many issues which are stagnating the growth of the company. The issues include growing competition and political challenges in form of an import deficit. The success factor in regards to identified issues of competition and import deficit includes adopting new technologies that help in automating the benefits of the technique in eliminating the competition. Besides, the FTA agreement can also be carried out to eliminate the trade deficit and restore a better trade balance between the countries.
Import deficit due to trading issues with China
Based on the analysis of PEST it has been seen that the company has been too dependent and over-reliant on China to meet its import needs of significant components of its manufacturing and production process. Due to the present trading issues that the company is facing with China, a huge import deficit has been noticed in the delivery of important competitors that were earlier easily delivered from China at lower prices.
Figure 1: Identified issues
(Source: FALADE and By, 2019, p. 74)
The decline in available capital resource
Due to the current economic situation suffering from the covid-19 scenario prevalent all around the world, the business operations of Thermax Ltd company were adversely affected. This led the company towards incurring and experiencing many financial losses. Due to the economic constraints of covid-19, the company was already in deep need of capital investment to meet its operations and marketing needs (Gishen et al. 2016, p. 42). Though the company is providing products and services at a cheaper cost, since there is no product differentiation from what is already available in the market that too of better quality and more shelf life.
Extreme competitive rivalry
The evidence gathered from porter’s five forces states that with the arrival of BHEL corporations’ limited company which is currently the market leader in the energy and power sector, the company faced difficulty in keeping its stability on the ground due to extreme competitive rivalry (Gutiérrez and Gallegos, 2019, p. 944). The growing competitive rivalry decreases the growth of business operations for Thermax Ltd.
Strategic Proposal
To effectively counter the existing issues that have been identified above, the Thermax Ltd Company needs to incorporate some productive strategy that would help the company to get back on its track and increase its profit over the coming times. With the proper implementation of the following strategic proposals, it is expected that the company would be benefitted and minimize the impact of identified issues on its business operations and gain an even more competitive advantage over its existing rival which would be difficult to match.
Improve business relations with US and UK
Due to trading issues with China, the Thermax Ltd Company experienced import deficits. To counter this and make sure that the occurrence of such issues is mitigated in the future, the company should try to develop better business relations with other potential importers. The US and UK have been the major suppliers of engineering components required by other companies in the heat and energy sector (Condrat, 2019, p. 36). With the improvement of business ties with these countries, the Thermax Ltd Company can also get its imports from these countries and decrease its dependency and overreliance on China, which would eventually improve its market positions and increase its sales.
Incorporate extensive cost-cutting measures
This strategic proposal would enable the Thermax Ltd company to reduce the cost of its product and services considerably. The strategic cost optimisation framework can be undertaken by Thermax Ltd comprising of reducing, optimise, rationalise and transform. The cost-cutting framework helps the organisation in eliminating the high cost that is associated with the operational business activities of the firm.
Figure 2: Strategic cost optimisation framework
(Source: Likwa and Mweenda, 2019, p. 57)
Discontinue insignificant business operations and process
There are many business operations and sectors of Thermax Ltd company that are insignificant and do not give expected returns on investments. By closing them and focusing only on relative major operations of heat and energy which is their main domain (Likwa and Mweenda, 2019, p. 57). Those investments carried out in irrelevant sectors put the company towards further economic loss which when invested in the heat and energy sector can give better returns.
Bring about and implement effective product and service differentiation
The other major issue that the company needs to address is its presence of little to no differentiation in its product and services. There is nothing different that Thermax Ltd is offering which cannot be obtained from other competitor companies. Lack of differentiation makes it challenging for the business to increase its brand reputation and achieve competitive advantages. Thermax Ltd can achieve differentiation by adopting green products which promote environmental sustainability.
Balancing existing portfolio
In this turbulent environment, almost all companies have experienced volatility in earnings. In this scenario, it becomes important that the existing portfolios are well balanced (Gustrén, 2020, p. 43). The focus of Thermax Ltd at present should be more on standard products such as baby boilers which involve minimum design optimization.
Increase investments and mergers
The company should tie-up with other companies and do mergers with potential companies to emerge out from this economic depression. The company can invest in these companies which would give them good returns. The companies can also invest in other green technologies and products which would help the company attain product differentiation.
Spread the business to other selective countries
The company is getting too dependent on the sales result of a single country which is dependent on many social, political, and economic environments. Thermax Ltd can venture their business in countries based on their favorable business environment, which grows their chances of earning high growth and success (Solovieva and Quintanar, 2020, p. 117). The suitable country should only be selected by carrying out extensive PEST analysis.
Introduce green products to enhance environmental sustainability
The introduction of green products would serve many purposes to the Thermax Ltd company. On one hand, it would help the company in bringing about a differentiation into their product. While on the other hand, it would make sure that the methods used are environmentally sustainable. These green products can sometimes even be cheaper to produce, thus decreasing the operational cost.
Figure 3: Strategic Proposal for the three identified issues
(Source: Makedon et al. 2019, p. 61)
Impact on stakeholder
The implementation of operational change can adversely affect many of the involved stakeholders due to the adoption of completely new strategies and business processes. But the stakeholders who are most likely to get impacted by these policies and operational changes would be existing employees and the current suppliers of Thermax Ltd company. The different ways in which these changes would impact the identified stakeholders has been briefly explained below
Impact on existing employees
The incorporation of changes in the training structure of the employees by the HR department is most likely to affect the employees who are currently working at Thermax Ltd, especially the management team. The employees would also need to learn new skills and knowledge about different innovative technologies to cope up with the changes (Honkanen, 2019, p. 39). Handling the manufacturing and production process of green products would also need a new skill set which the employees would need to master in a very limited period.
Impact on current suppliers
Since a whole new business approach would be adopted by Thermax company, the need for new suppliers arises. The previous suppliers used to deliver components that were technologically outdated and not environment friendly. With the incorporation of green products and implementations of the latest technological advancements and innovative techniques, the existing suppliers would be adversely affected since now they cannot supply what the company needs. This would push the suppliers to lose as their major source of income would be cut off.
Significance of proposal
Each proposal recommended in this report would help the company in attaining more sales, which would eventually lead to even more profit and success. The significance of each move has been explained below to make sure that the recommended proposal is robust and can stand the test of time and critical adversity which would thereby defend strategic direction and preferred proposal in the long run.
Improve business relations with US and UK
The Thermax Ltd Company is currently facing many issues with China which has adversely affected its business ties and trading process. This has created an import deficit for the company where the company is not able to get the supply of necessary components. Improving business relations with the US and UK and engaging in FTA agreements would make sure that there is no further deficit in exports experienced by the Thermax Ltd company. A smooth flow of required components would always be available
Incorporate extensive cost-cutting measures
The significance of this step is to reduce the capital expenditure of the company. The company has already been going through a major loss in current times and with the need of incorporation of new operation strategy and techniques, it becomes even more necessary to preserve capital for these purposes (Costa and Neto, 2017, p. 375). The cost of products and services would decrease considerably which would attract more customers towards their product. This would ultimately increase the sales and business activity of Thermax Ltd Company and help it to remerge in the market.
Discontinue insignificant business operations and process
There are some business practices and processes in the company that are insignificant and are not helping the company in any way. There is not much profit that can be extracted out from those processes. These business operations and processes are taking up huge investments of the company without any significant return. This strategy would ensure savings of huge capital which can then be used for other relevant purposes.
Implement effective product and service differentiation
Since all the companies are delivering almost similar products into the market, it is giving huge bargaining power to customers. By bringing some effective product differentiation, the Thermax Company could make sure that there is a variety available to customers which would make the customers buy some specific products only from Thermax Ltd company. This would highly weaken the existing bargaining power of customers in the market.
Spread the business to other countries
The business operations of the Thermax Ltd Company are getting very much affected due to the prevalent external environment of the company and the country in which it operates. The country has been going through an economic slowdown, faces many political issues due to the present government, has no focus on environmental sustainability and the environment is not conducive to business. By spreading the business to other countries, the organisation can remain secure from these external environmental factors
Adopt green products to ensure environmental sustainability
There has been a growing demand for the incorporation of sustainable methods in business operations looking at the current environment trend. By adopting green products, the Thermax Ltd company can make its contributions towards the green earth initiative while also staying relevant for a long time in the market, even in the future. This can also prove to be a differentiating and cost-cutting factor.
Increase investments and mergers
This move would prove to be very beneficial for the Thermax Ltd company as this would ensure that the company gets benefited from the successful business operations of other companies as well. The company can take advantage of the good performance of other smaller companies that are making profits at present to increase and expand its business by acquiring them.
Conclusion
In this business management report, at first, an extensive analysis of the competitive advantage of Thermax Ltd Company was carried out. It was followed by the identification of three major issues that are plaguing the growth of the company. Based on those identified issues, some important strategic recommendations were made. The potential impact of the recommended strategy proposal on the likely stakeholders was briefly discussed. In the end, some relevant significance of the strategy proposal was explained.
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