CHAPTER 6 Recommendations and Conclusions
6.2 Discussions of Research Objectives
In revisiting the problem statement, it was ascertained that Smiths' adopted strategies may need revision, given the nature of the changing environment. If the adopted strategies proved to be inappropriate, the outcomes of research fmdings were to be used to recommend appropriate strategies for Smiths.
In considering the problem statement, the research objectives were outlined in the first chapter.
Objective 1
• The general trends, patterns & requirements within the automotive industry
The first objective was to identify the trends and demand patterns in the automotive industry locally as well as globally. By means of literature review, the key trends such as global stagnancy in general, follow source-follow-design strategy, collaborative partnerships amongst the various suppliers, higher levels of modularization of various components, better quality at shorter lead times with lower costs of automotive component products are, amongst other trends that have been discussed. Main market growths have been arising predominantly in the emerging economies.
In general, the ~EM's relationship with their suppliers has been evolving which has resulted in a greater dependence on first tier manufacturers such a Smiths. The resulting trend as a consequence of this strategy is that these OEMs' suppliers have the potential to achieve economies of scale by becoming global mega-suppliers. This trend has exacerbated by the assimilation of the South African based OEM's into their main corporate entities worldwide.
The markets have evolved from being regional to becoming global. The value chain efficiencies and supply chain management are becoming an integral part within the manufacturing and supply processes. These trends impact upon Smiths directly as Smiths also competes in this market.
Objective 2
• The level of competitiveness of Smiths in comparison to other local as well as international firms
In general, Smiths was found to be in a strong competitive position given the niche market they focus on. Behr as the other competitor to Smiths was found to have high resource similarity and low market commonality on the Competitor Framework Analysis Grid, which according to Hitt et al., (2003:155-157) art~ not direct competitors.
In terms of levels of capability and performanee of local firms relative to international customer expectations & requirements, it was found that most areas were in favour in Smiths and local firms. However, there were weaknesses and threats that were highlighted which needs to be reviewed. Areas of cost quality and speed have proven to be key aspects in order to compete in the local as well as the global arena. Generally the international quality accreditations achieved by firms like Smiths has been in their favour.
South African Rand's weakness has been instrumental in helping to maintain competitiveness against global competitors, mainly of the Asian continent such as China and India. Opportunities such as AGOA and other trade agreements need to be used as a platform for firms like Smiths to further explore the export markets.
Undoubtedly the MIDP has been instrumental in sustaining the competitiveness ofthe local motor industry. The generally weaker rand has also helped the industry to be competitive.
The inherent threats such as political instability and crime seems to be hindering the progress. The other major factor serving as an impediment was the import parity pricing being adopted by local suppliers.
Objective 3
• The levels of improvements and quality concepts such as Kaizen and TQM that are noticeable at Smiths and other South African automotive heat exchanger component manufacture:rs
It was highlighted that Smiths' MDWT was established to continually improve with a focus on quality and cost and work ergonomics. Smiths' bright idea presentation is reward driven platform which encourages employees to come up with innovative ideas and solutions for
various problem aspects within their working environment. By Denso's acquisition of25%
shares in Smiths, the idea of Kaizen (a Japanese philosophy of continuous improvements) is further strengthened at Smiths. It must be stated that in view of the competitors not being open to discussion that objective was not fully realised and mainly Smiths was the focus.
Denso's first world technology also enables a process of technological learning for the employees at Smiths. It was also discovered that the management places increasing emphasis on the intellectual capital to nurture improved organizational learning.
The ABET training programs instituted at Smiths fosters a culture of continuous learning amongst the unskilled workforce. Management do however admit that more needs to be done to continually uplift the work and quality standards within the organisation.
Objective 4
• The future growth potential of local as well as export markets and the viability thereof for local manufacturers such as Smiths
In keeping with the global trend, the future growth potential exists for Smiths through further collaborations with companies such as Denso. The other developing countries such as China and India also have a hugely untapped market. In reviewing the main part of the objective which was intended to identify the current strategies being pursued by Smiths, it has highlighted a few important points.
As identified in the preceding chapters, the evidence suggests that Smiths is pursuing a low cost focussed strategy which is normally characteristic of a finn targeting a specific, often narrow, segment of the market. Focus also is based on adopting a narrow competitive scope within an industry that large firms may have overlooked. The focus strategy aims at growing market share through operating in a narrow market or niche segment more effectively than larger competitors. A successful focus strategy depends upon an industry segment large enough to have good growth potential but small enough not to be important to other major competitors. Focusing allows the Smiths to direct its resources to certain value chain activities to build its advantage.
The current strategy has enabled Smiths to achieve above the required return on investments. Their strength lies in the multiple license agreements Smiths holds from
various global players which enabled them to manufacture in terms of follow design, follow-source strategy. Through this, Smiths gained access to leading technological innovations in the industry. Smiths' added strength also currently comes from Denso's 25%
share acquisition which invariably means that Denso also has vested interested in Smiths' performance. Visit by Mr Toyoda (executive vice president of Toyota Motor Corporation- TMC) on 23rd March 2006 was a major highlight in Smiths' history (Smiths' Weekly News). In a letter of appreciation by Dr Toyoda to Smiths' MD, Mr Leon Coetzee, there were compliments and words of encouragement for the level of success achieved by Smiths in close collaboration with Denso and Toyota SA.
There have been in-house and external training programmes instituted by Smiths in recognising the need for improving the vital assets of intellectual capital of the organization which is often the lifeblood of the organization but usually underrated.