Hilti cut or Fasten? Essay

This case review was executed about a case study that was discussed in class on the operations of Hilti and its surroundings – Hilti is a global corporation based in Lichtenstein that is a market leader in drills, saws and fastening products. The analysis looks at the development of Hilti ever since it was founded, and the different strategies which have been implemented to get them to where they are now. For a company that has been very successful which is now going through a period of recession, with sales decreasing which has been caused by a global financial crisis – a question for the CEO whether to hold fast and risk an investment loss, or cut costs to reduce the impact of a drop in profits. This report will provide an idea of Hilti’s current strategies and will look at the key strategic issues both internally and externally, and in conclusion will provide recommendations for what the CEO at Hilti should do moving forward. Hilti’s Business Strategy – Current The Current Business Strategy for Hilti has been quite successful since Michael Hilti took over from his father. Michael introduced the Champion 3C’s (Customer, Competence and Concentration) strategy in order to measure performance both internally and externally and saw the importance for a focus on the customers (external) and the product ranging (internal). â€Å"Hilti has set itself the goal of being a great company. The priorities set to achieve it are growth, differentiation, productivity and employee development† (Hilti Annual Report 2008) After conducting a Porters Generic Value Chain Analysis (Appendix C) it can be seen that the HR strategy in place at Hilti is very strong and must be working well. This finding can lead to assume that this strategy allows the company successfully look after their customers needs, being able to attract the right employees into the firm who bring along a positive attitude, good values and knowledgeable expertise. Eventually this will allow them â€Å"†¦to convert distinctive competence into competitive advantage† (Andrews, 1987). Hilti is known for utilising the most innovative technology and makes this a key focus during its R&D phase on emerging particular products. This helps Hilti to meet the company’s value proposition when the 2 pillars of ‘Customers’ and ‘Competence are also met (See Appendix 2). Looking at the analysis from Appendix 2 – It is highlighted that there are a number of resources that the company can influence to strive a competitive advantage. The value is added to the firm by aligning its strong value proposition with its strategy Strategic Issues (Internal/External Analysis) Unfortunately Hilti is currently challenged with a few strategic issues as the company is confronted with the current economic downslide. To identify the strategic issues both internal and external analysis was conducted by using the Business system tool (De Wit & Meyer 2010) which breaks down the resources and capabilities, activity system and their product offering (Appendix 1); Barneys VRIE model was used to assess the value, rareness, imitability and exploitation of key resources/capabilities (Barney 1995), Porters Five Forces model (Porter, 1985) was used to view the competitive environment and lastly a value chain analysis was conducted by means of Porters Generic Value Chain Analysis (Porter, 1985). Looking at the VRIE model (Value, Rareness, Inimitability & Exploitable) shown in Appendix 2 – although there are many resources and capabilities that Hilti does capture well for a competitive advantage, however when a closer look is taken you are able to see that there are many resources and capabilities which can be easily copied by a similar firm within the industry which leads to suggest that Hilti may possibly be able to be more competitive in its strategy. The findings from the VRIE are reinforced from Porters Supply Chain Analysis and the Business System Tool Model; as Hilti has built long-lasting customer relationships from being within the industry over a long period of time. From Porters Five Forces analysis in Appendix 3, it is evident that Hiltis’ surrounding environment is ever-evolving and fast moving and to stay and remain competitive in this field Hilti must keep up and with its research and product development to keep improving with innovation and technology. By staying ahead, continuously evaluating and improving Hitli can outperform competitors within the industry. Hilti is confronted with the following issues: Without a stable economy the value created may not be as effective within the industry – See Appendix 1) because if consumers don’t have the financial capacity to spend, then value to the consumer may change. Hilti must keep up or ahead with the innovation and technology that competitors are using within the industry – by looking at a sales approach from a social media sense, moving into E-business and shop-in-shop) as the current direct sales method is becoming out-dated. Hilti must look at aligning its Internal and external strategies as the economic crisis caused a decline in sales because customers were not confident to spend during this period (external), for this reason Hilti must work on improving its internal strategies such as HR, R&D, Sales etc Strategic Options and Recommendations The misfit gap between Hilti’s internal and external strategies increases over time and this gap needs to be reduced. For this to occur, Hilti must go through a process of strategic renewal. The below chart illustrates how strategic drift increases over a period of time, and only when strategic renewal strategies are implemented can this gap be decreased. Strategic Renewal Process De Wit & Meyer, 2010 Due to the changing nature and constant fluctuations within the strategic drift, regular strategies must be implemented to minimise the size of this gap. The Strategic integration Model (Fuchs et al, 2000) states the desire to make sure that all strategies complement each other. Many internal and external factors affect the strategic drift, such as competitors. These factors require Hilti to utilise and capitalise on techniques which are evolutionary, else the decline or delayed absence will be detrimental. After reviewing the above analysis the following recommendations are made; New innovative networks with the introduction of E-Business sector to make sure the sales strategy is getting out to as many potential customers as possible Authorise management to be able to make small changes immediately (revolutionary) – this will in order to keep costs down and increase profits Keep evolutionary changes to a low when it comes to the activity system to maintain the key attributes Keep employee levels at where they are now – disrupting this will affect the morale. The idea is to maintain a positive work culture and relaxed environment. The HR strategy should change to make sure no additional people are hired, instead the attention should be on growing and improving the current employees – this is to set the company up, so when the market recovers the company is in a better position. If these above recommendations are applied – Hilti can increase its competitive advantage and in turn alleviate the effects of the current Global Financial Crises. This will set Hilti up so eventually when the market does recover, the company will be stable and ready. Appendix 1: Business System Model Appendix 2: VRIE – Value, Rareness, Imitability & Exploitable Appendix 3: Porters 5 Forces Analysis Source: Porters 5 Forces: http://www.mindtools.com/pages/article/newTMC_08.html Appendix 4: Value Chain Analysis The Generic Value Chain (Porter, 1985), (De Wit & Meyer, 2010) Primary Activities Support Activities Hilti Annual Report 2008, De Wit & Meyer 2010. Reference List Andrews, K, 1987, The Concept of Corporate Strategy, McGraw Hill, Chapter 2. Barney, JB, (1995), Looking inside for competitive advantage, Academy of Management Executive, 9 (4), 49-61. De Wit, B. & Meyer, R.J.H. (2004), Strategy – Process, Content and Context: An International Perspective, 3rd edition, London: Thomson De Wit, B. & Meyer, R.J.H. (2010), Strategy – Process, Content and Context: An International Perspective, 4th edition, London: Thomson Fuchs, P., Mifflin, K., Miller, D. & Whitney, J. (2000). Strategic integration: competing in the age of capabilities. California Management Review, 42 (3), pp.118-147 Hilti Annual Report 2008 – Viewed online 30th July 2013 http://www.hilti.com/fstore/holcom/LinkFiles/Unternehmensbericht_2008_en.pdf Porter, ME (1985), Competitive advantage: creating and sustaining superior performance, Free Press, New York Porter Five Forces model – Viewed online 31st July 2013 http://www.mindtools.com/pages/article/newTMC_08.html