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Ten Important Lessons From the History of Mergers & Acquisitions

The history of mergers and acquisitions in the United States is comprised of a series of five distinct waves of activity. Each wave occurred at a different time, and each exhibited some unique characteristics related to the nature of the activity, the sources of funding for the activity, and to some extent, differing levels of success from wave to wave. When the volume, nature, mechanisms, and outcomes of these transactions are viewed in an objective historical context, important lessons emerge.

 

The First Wave

The first substantial wave of merger and acquisition activity in the United States occurred between 1898 and 1904. The normal level of about 70 mergers per year leaped to 303 in 1898, and crested at 1,208 in 1899. It remained at more than 300 every year until 1903, when it dropped to 142, and dropped back again into what had been a range of normalcy for the period, with 79 mergers, in 1904. Industries comprising the bulk of activity during this first wave of acquisition and merger activity included primary metals, fabricated metal products, transportation equipment, machinery, petroleum products, bituminous coal, chemicals, and food products. By far, the greatest motivation for these actions was the expansion of the business into adjacent markets. In fact, 78% of the mergers and acquisitions occurring during this period resulted in horizontal expansion, and another 9.7% involved both horizontal and vertical integration.

 

During this era in American history, the business environment related to mergers and acquisitions was much less regulated and much more dynamic than it is today. There was very little by way of antitrust impediments, with few laws and even less enforcement. 

 

The Second Wave

The second wave of merger and acquisition activity in American businesses occurred between 1916 and 1929. Having become more concerned about the rampant growth of mergers and acquisitions during the first wave, the United States Congress was much more wary about such activities by the time the second wave rolled around. Business monopolies resulting from the first wave produced some market abuses, and a set of business practices that were viewed as unfair by the American public. Even the Sherman Act proved to be relatively ineffective as a deterrent of monopolistic practices, and so Congress passed another piece of legislation entitled the Clayton Act to reinforce the Sherman Act in 1914. The Clayton Act was somewhat more effective, and proved to be particularly useful to the Federal Government in the late 1900s. However, during this second wave of activity in the years spanning 1926 to 1930, a total of 4,600 mergers and acquisitions occurred. The industries with greatest concentrations of these activities included primary metals, petroleum products, chemicals, transportation equipment, and food products. The upshot of all of these consolidations was that 12,000 companies disappeared, and more than $13 billion in assets were acquired (17.5% of the country’s total manufacturing assets).

 

The nature of the businesses formed was somewhat different in the second wave; there was a higher incidence of mergers and acquisitions to achieve vertical integration in the second wave, and a much higher percentage of the resulting businesses resulted in conglomerates that included previously unrelated businesses.  The second wave of acquisition and merger activity in the United States ended in the stock market crash on October 29, 1929, and this altered – perhaps forever – the perspective of investment bankers related to funding these transactions. Companies that grew to prominence through the second wave of mergers and acquisitions in the United States, and that still operate in this country today, include General Motors, IBM, John Deere (now Deere & Company), and Union Carbide. 

The Third Wave

The American economy during the last half of the 1960s (1965 through 1970) was booming, and the growth of corporate mergers and acquisitions, especially related to conglomeration, was unprecedented. It was this economic boom that painted the backdrop for the third wave of mergers and acquisitions in American history. A peculiar feature of this period was the relatively common practice of companies targeting acquisitions that were larger than themselves. This period is sometimes referred to as the conglomerate merger period, owing in large measure to the fact that acquisitions of companies with over $100 million in assets spiked so dramatically. Compared to the years preceding the third wave, mergers and acquisitions of companies this size occurred far less frequently. Between 1948 and 1960, for example, they averaged 1.3 per year. Between 1967 and 1969, however, there were 75 of them – averaging 25 per year.  During the third wave, the FTC reports, 80% of the mergers that occurred were conglomerate transactions. 

 

Although the most recognized conglomerate names from this period were huge corporations such as Litton Industries, ITT and LTV, many small and medium size companies attempted to pursue an avenue of diversification. The diversification involved here included not only product lines, but also the industries in which these companies chose to participate. As a result, most of the companies involved in these activities moved substantially outside of what had been regarded as their core businesses, very often with deleterious results. 

 

It is important to understand the difference between a diversified company, which is a company with some subsidiaries in other industries, but a majority of its production or services within one industry category, and a conglomerate, which conducts its business in multiple industries, without any real adherence to a single primary industry base. Boeing, which primarily produces aircraft and missiles, has diversified by moving into areas such as Exostar, an online exchange for Aerospace & Defense companies. However, ITT has conglomerated, with industry leadership positions in electronic components, defense electronics & services, fluid technology, and motion & flow control. While the bulk of companies merged or acquired in the long string of activity resulting in the current Boeing Company were almost all aerospace & defense companies, the acquisitions of ITT were far more diverse. In fact, just since becoming an independent company in 1995, ITT has acquired Goulds Pumps, Kaman Sciences, Stanford Telecom and C&K Components, among other companies.

 

Since the ascension of the third wave of mergers and acquisitions in the 1960s, there has been a great deal of pressure from stockholders for company growth. With the only comparatively easy path to that growth being the path of conglomeration, a lot of companies pursued it. That pursuit was funded differently in this third wave of activity, however. It was not financed by the investment bankers that had sponsored the two previous events. With the economy in expansion, interest rates were comparatively high and the criteria for obtaining credit also became more demanding. This wave of merger and acquisition activity, then, was executed by the issuance of stock. Financing the activities through the use of stock avoided tax liability in some cases, and the resulting acquisition pushed up earnings per share even though the acquiring company was paying a premium for the stock of the acquired firm, using its own stock as the currency.

The use of this mechanism to boost EPS, however, becomes unsustainable as larger and larger companies are involved, because the underlying assumption in the application of this mechanism is that the P/E ratio of the (larger) acquiring company will transfer to the entire base of stock of the newly combined enterprise. Larger acquisitions represent larger percentages of the combined enterprise, and the market is generally less willing to give the new enterprise the benefit of that doubt. Eventually, when a large number of merger and acquisition activities occur that are founded on this mechanism, the pool of suitable acquisition candidates is depleted, and the activity declines. That decline is largely responsible for the end of the third wave of merger and acquisition activity. 

One other mechanism that was used in a similar way, and with a similar result, in the third wave or merger and acquisition activity was the issue of convertible debentures (debt securities that are convertible into common stock), in order to gather in the earnings of the acquired firm without being required to reflect an increase in the number of shares of common stock outstanding. The resulting bump in visible EPS was known as the bootstrap effect. Over the course of my own career, I have often heard of similar tactics referred to as “creative accounting”. 

 

Almost certainly, the most conclusive evidence that the bulk of conglomeration activity achieved through mergers and acquisitions is harmful to overall company value is the fact that so many of them are later sold or divested. For example, more than 60% of cross-industry acquisitions that occurred between 1970 and 1982 were sold or divested in some other manner by 1989. The widespread failure of most conglomerations has certainly been partly the result of overpaying for acquired companies, but the fact is that overpaying is the unfortunate practice of many companies. In one recent interview I conducted with an extremely successful CEO in the healthcare industry, I asked him what actions he would most strongly recommend that others avoid when entering into a merger or acquisition. His response was immediate and emphatic: “Don’t become enamored with the acquisition target”, he replied. “Otherwise you will overpay. The acquisition has to make sense on several levels, including price.” 

 

The failure of conglomeration, then, springs largely from another root cause. Based on my own experience and the research I have conducted, I am reasonably certain that the most fundamental cause is the nature of conglomeration management. Implicit in the management of conglomerates is the notion that management can be done well in the absence of specialized industry knowledge, and that just isn’t usually the case. Regardless of the “professional management” business curricula offered by many institutions of higher learning these days, in most cases there is just no substitute for industry-specific experience. 

            

The Fourth Wave

The first indications that a fourth wave of merger and acquisition activity was imminent appeared in 1981, with a near doubling of the value of these transactions from the prior year. However, the surge receded a bit, and really regained serious momentum again in 1984.   According to Mergerstat Review (2001), just over $44 billion was paid in merger and acquisition transactions in 1980 (representing 1,889 transactions), compared to more than $82 billion (representing 2,395 transactions) in 1981. While activity fell back to between $50 billion and $75 billion in the ensuing two years, the 1984 activity represented over $122 billion and 2,543 transactions. In terms of peaks, the number of transactions peaked in 1986 at 3,336 transactions, and the dollar volume peaked in 1988 at more than $246 billion. The entire wave of activity, then, is regarded by analysts to have occurred between 1981 and 1990. 

 

There are a number of aspects of this fourth wave that distinguish it from prior activities. The first of those characteristics is the advent of the hostile takeover. While hostile takeovers have been around since the early 1900s, they truly proliferated (more in terms of dollars than in terms of percent of transactions) during this fourth wave of merger and acquisition activity. In 1989, for example, more than three times as many dollars were transacted as a result of contested tender offers than the dollars associated with uncontested offers. Some of this phenomenon was closely tied to another characteristic of the fourth wave of activity; the sheer size and industry prominence of acquisition targets during that period. Referring again to Mergerstat Review‘s numbers published in 2001, the average purchase price paid in merger and acquisition transactions in 1970, for example, was $9.8 million. By 1975, it had grown to $13.9 million, and by 1980 it was $49.8 million. At its peak in 1988, the average purchase price paid in mergers and acquisitions was $215.1 million.   Exacerbating the situation was the volume of large transactions. The number of transactions valued at more than $100 million increased by more than 23 times between 1974 and 1986, which was a stark contrast to the typically small-to-medium size company based activities of the 1960s.

 

Another factor that impacted this fourth wave of merger and acquisition activity in the United States was the advent of deregulation. Industries such as banking and petroleum were directly affected, as was the airline industry.   Between 1981 and 1989, five of the ten largest acquisitions involved a company in the petroleum industry – as an acquirer, an acquisition, or both. These included the 1984 acquisition of Gulf Oil by Chevron ($13.3 billion), the acquisition in that same year of Getty Oil by Texaco ($10.1 billion), the acquisition of Standard Oil of Ohio by British Petroleum in 1987 ($7.8 billion), and the acquisition of Marathon Oil by US Steel in 1981 ($6.6 billion).  Increased competition in the airline industry resulted in a severe deterioration in the financial performance of some carriers, as the airline industry became deregulated and air fares became exposed to competitive pricing.

 

An additional look at the ontology of the ten largest acquisitions between 1981 and 1989 reflects that relatively few of them were acquisitions that extended the acquiring company’s business into other industries than their core business. For example, among the five oil-related acquisitions, only two of them (DuPont’s acquisition of Conoco and US Steel’s acquisition of Marathon Oil) were out-of-industry expansions. Even in these cases, one might argue that they are “adjacent industry” expansions. Other acquisitions among the top ten were Bristol Meyers’ $12.5 billion acquisition of Squibb (same industry – Pharmaceuticals), and Campeau’s $6.5 billion acquisition of Federated Stores (same industry – Retail). 

 

The final noteworthy aspect of the “top 10” list from our fourth wave of acquisitions is the characteristic that is exemplified by the actions of Kohlberg Kravis. Kohlberg Kravis performed two of these ten acquisitions (both the largest – RJR Nabisco for $5.1 billion, and Beatrice for $6.2 billion). Kohlberg Kravis was representative of what came to be known during the fourth wave as the “corporate raider”. Corporate raiders such as Paul Bilzerian, who eventually acquired the Singer Corporation in 1988 after participating in numerous previous “raids”, made fortunes for themselves by attempting corporate takeovers. Oddly, the takeovers did not have to be ultimately successful for the raider to profit from it; they merely had to drive up the price of shares they acquired as a part of the takeover attempt. In many cases, the raiders were actually paid off (this was called “greenmail”) with corporate assets in exchange for the stock they had acquired in the attempted takeover. 

 

Another term that came into the lexicon of the business community during this fourth wave of acquisition and merger activity is the leveraged buy-out, or LBO. Kohlberg Kravis helped develop and popularize the LBO concept by creating a series of limited partnerships to acquire various corporations, which they deemed to be underperforming. In most cases, Kohlberg Kravis financed up to ten percent of the acquisition price with its own capital and borrowed the remainder through bank loans and by issuing high-yield bonds. Usually, the target company’s management was allowed to retain an equity interest, in order to provide a financial incentive for them to approve of the takeover.

 

The bank loans and bonds used the tangible and intangible assets of the target company as collateral. Because the bondholders only received their interest and principal payments after the banks were repaid, these bonds were riskier than investment grade bonds in the event of default or bankruptcy. As a result, these instruments became known as “junk bonds.” Investment banks such as Drexel Burnham Lambert, led by Michael Milken, helped raise money for leveraged buyouts. Following the acquisition, Kohlberg Kravis would help restructure the company, sell off underperforming assets, and implement cost-cutting measures. After achieving these efficiencies, the company was usually then resold at a significant profit.

 

Increasingly, as one reviews the waves of acquisition and merger activity that have occurred in the United States, this much seems clear: While it is possible to profit from the creative use of financial instruments and from the clever buying and selling of companies managed as an investment portfolio, the real and sustainable growth in company value that is available through acquisitions and mergers comes from improving the newly formed enterprise’s overall operating efficiency. Sustainable growth results from leveraging enterprise-wide assets after the merger or acquisition has occurred. That improvement in asset efficiency and leverage is most frequently achieved when management has a fundamental commitment to the ultimate success of the business, and is not motivated purely by a quick, temporary escalation in stock price. This is related, in my view, to the earlier observation that some industry-specific knowledge improves the likelihood of success as a new business is acquired. People who are committed to the long-term success of a company tend to pay more attention to the details of their business, and to broader scope of technologies and trends within their industry.  

 

There were a few other characteristics of the fourth wave of merger and acquisition activity that should be mentioned before moving on. First of all, the fourth wave saw the first significant effort by investment bankers and management consultants of various types to provide advice to acquisition and merger candidates, in order to earn professional fees. In the case of the investment bankers, there was an additional opportunity around financing these transactions. This opportunity gave rise, in large measure, to the junk bond market that raised capital for acquisitions and raids. Secondly, the nature of the acquisition – and especially the nature of takeovers – became more intricate and strategic in nature. Both the takeover mechanisms and paths and the defensive, anti-takeover methods and tools (eg: the “poison pill”) became increasingly sophisticated during the fourth wave. 

 

The third characteristic in this category of “other unique characteristics” in the fourth wave was the increased reliance on the part of acquiring companies on debt, and perhaps even more importantly, on large amounts of debt, to finance the acquisition. A significant rise in management team acquisition of their own firms using comparatively large quantities of debt gave rise to a new term – the leveraged buy-out (or LBO) – in the lexicon of the Wall Street analyst. 

 

The fourth characteristic was the advent of the international acquisition. Certainly, the acquisition of Standard Oil by British Petroleum for $7.8 billion in 1987 marked a change in the American business landscape, signaling a widening of the merger and acquisition landscape to encompass foreign buyers and foreign acquisition targets. This deal is significant not only because it involved foreign ownership of what had been considered a bedrock American company, but also because of the sheer dollar volume involved. A number of factors were involved in this event, such as the fall of the US dollar against foreign currencies (making US investments more attractive), and the evolution of the global marketplace where goods and services had become increasingly multinational in scope. 

 

The Fifth Wave

The fifth wave of acquisition and merger activity began immediately following the American economic recession of 1991 and 1992. The fifth wave is viewed by some observers as still ongoing, with the obvious interruption surrounding the tragic events September 11, 2001, and the recovery period immediately following those events. Others would say that it ended there, and after the couple of years ensuing, we are seeing the imminent rise of a sixth wave. Having no strong bias toward either view, for purposes of our discussion here I will adopt the first position. Based on the value of transactions announced over the course of the respective calendar years, the dollar volume of total mergers and acquisitions in the US in 1993 was $347.7 billion (an increase from $216.9 billion in 2002), continued to grow steadily to $734.6 billion in 1995, and expanded still further to $2,073.2 billion by 2000.    

 

This group of deals differed from the previous waves in several respects, but arguably the most important difference was that the acquisitions and mergers of the 1990s were more thoughtfully orchestrated than in any previous foray. They were more strategic in nature, and better aligned with what appeared to be relatively sophisticated strategic planning on the part of the acquiring company. This characteristic seems to have solidified as a primary feature of major merger and acquisition activity, at least in the US, which is encouraging for shareholders looking for sustainable growth rather than a quick – but temporary – bump in share price. 

 

A second characteristic of the fifth wave of acquisitions and mergers is that they were typically more equity-based than debt-based in terms of their funding. In many cases, this worked out well because it relied less on leverage that required near-term repayment, enabling the new enterprise to be more careful and deliberate about the sell-off of assets in order to service debt created by the acquisition.  

 

Even in cases where both of these features were prominent aspects of the deal, however, not all have been successful. In fact, some of the biggest acquisitions have been the biggest disappointments over recent years. For example, just before the announcement of the acquisition of Time Warner by AOL, a share of AOL common stock traded for about $94. In January of 2005, that share of stock was worth about $17.50. In the Spring of 2003, the average share price was more like $11.50. The AOL Time Warner merger was financed with AOL stock, and when the expected synergies did not materialize, market capitalization and shareholder value both tanked. What was not foreseen was the devaluation of the AOL shares used to finance the purchase. As analyst Frank Pellegrini reported in Time’s on-line edition on April 25, 2002: “Sticking out of AOL Time Warner’s rather humdrum earnings report Wednesday was a very gaudy number: A one-time loss of $54 billion. It’s the largest spill of red ink, dollar for dollar, in U.S. corporate history and nearly two-thirds of the company’s current stock-market value.” 

The fifth wave has also become known as the wave of the “roll-up”. A roll-up is a process that consolidates a fragmented industry through a series of acquisitions by comparatively large companies (typically already within that industry) called consolidators. While the most widely recognized of these roll-ups occurred in the funeral industry, office products retailers, and floral products, there were roll-ups of significant magnitude in other industries such as discrete segments of the aerospace & defense community. 

 

Finally, the fifth wave of acquisitions and mergers was the first one in which a very large percentage of the total global activity occurred outside of the United States. In 1990, the volume of transactions in the US was $301.3 billion, while the UK had $99.3 billion, Canada had $25.3 billion, and Japan represented $14.2 billion. By the year 2000, the tide was shifting. While the US still led with $2,073 billion, the UK had escalated to $473.7 billion, Canada had grown to $230.2 billion, and Japan had reached $108.8 billion. By 2005, it was clear that participation in global merger and acquisition activity was now anyone’s turf. According to barternews.com: “There was incredible growth globally in the M&A arena last year, with record-setting volume of $474.3 billion coming from the Asian-Pacific region, up 46% from $324.5 billion in 2004. In the U.S., M&A volume rose 30% from $886.2 billion in 2004. In Europe the figure was 49% higher than the $729.5 billion in 2004. Activity in Eastern Europe nearly doubled to a record $117.4 billion.” 

 

The Lessons of History

Many studies have been conducted that focus on historical mergers and acquisitions, and a great deal has been published on this topic. Most of the focus of these studies has been on more contemporary transactions, probably owing to factors such as the availability of detailed information, and a presumed increase in the relevance of more recent activity. However, before sifting through the collective wisdom of the legion of more contemporary studies, I think it’s important to look at least briefly to the patterns of history that are reflected earlier in this article.

 

Casting a view backward over this long history of mergers and acquisitions then, observing the relative successes and failures, and the distinctive characteristics of each wave of activity, what lessons can be learned that could improve the chances of success in future M&A activity?  Here are ten of my own observations:

  1. Silver bullets and statistics. The successes and failures that we have reviewed through the course of this chapter reveal that virtually any type of merger or acquisition is subject to incompetence of execution, and to ultimate failure. There is no combination of market segments, management approaches, financial backing, or environmental factors that can guarantee success. While there is no “silver bullet” that can guarantee success, there are approaches, tools, and circumstances that serve to heighten or diminish the statistical probability of achieving sustainable long-term growth through an acquisition or merger.
  2. The ACL Life Cycle is fundamental. The companies who achieve sustainable growth using acquisitions and mergers as a mainstay of their business strategy are those that move deliberately through the Acquisition / Commonization / Leverage (ACL) Life Cycle. We saw evidence of that activity in the case of US Steel, Allied Chemical, and others over the course of this review.
  3. Integration failure often spells disaster. Failure to achieve enterprise-wide leverage through the commonization of fundamental business processes and their supporting systems can leave even the largest and most established companies vulnerable to defeat in the marketplace over time. We saw a number of examples of this situation, with the American Sugar Refining Company perhaps the most representative of the group.
  4. Environmental factors are critical. As we saw in our review of the first wave, factors such as the emergence of a robust transportation system and strong, resilient manufacturing processes enabled the success of many industrial mergers and acquisitions. So it was more recently with the advent of information systems and the Internet. Effective strategic planning in general, and effective due diligence specifically, should always include a thorough understanding of the business environment and market trends. Often times, acquiring executives become enamored with the acquisition target (as mentioned in our review of third wave activity), and ignore contextual issues as well as fundamental business issues that should be warning signs.
  5. Conglomeration is challenging. There were repeated examples of the challenges associated with conglomeration in our review of the history of mergers and acquisitions in the United States. While it is possible to survive – and even thrive – as a conglomerate, the odds are substantially against it. Those acquisitions and mergers that most often succeed in achieving sustainable long-term growth are the ones involving management with significant industry-specific and process-specific expertise. Remember the observation, during the course of our review of fourth wave activity, that “the most conclusive evidence that the bulk of conglomeration activity achieved through mergers and acquisitions is harmful to overall company value is the fact that so many of them are later sold or divested.”
  6. Commonality holds value. Achieving significant commonality in fundamental business processes and the information systems that support them offers an opportunity for genuine synergy, and erects a substantive barrier against competitive forces in the marketplace. We saw this a number of times; Allied Chemical is especially illustrative. 
  7. Objectivity is important. As we saw in our review of the influence of investment bankers vetoing questionable deals during second wave activities, there is considerable value in the counsel of objective outsiders. A well-suited advisor will not only bring a clear head and fresh eyes to the table, but will often introduce important evaluative expertise as a result of experience with other similar transactions, both inside and outside of the industry involved.
  8. Clarity is critical. We saw the importance of clarity around the expected impacts of business decisions in our review of the application of the DuPont Model and similar tools that enabled the ascension of General Motors. Applying similar methods and tools can provide valuable insights about what financial results may be expected as the result of proposed acquisition or merger transactions.
  9. Creative accounting is a mirage. The kind of creative accounting described by another author as “finance gimmickry” in our review of third wave activity does not generate sustainable value in the enterprise, and in fact, can prove devastating to companies who use it as a basis for their merger or acquisition activity.
  10. Prudence is important when selecting financial instruments to fund M&A transactions. We observed a number of cases where inflated stock values, high-interest debt instruments, and other questionable choices resulted in tremendous devaluation in the resulting enterprise. Perhaps the most illustrative example was the recent AOL Time Warner merger described in the review of fifth wave activity.

Many of these lessons from history are closely related, and tend to reinforce one another. Together, they provide an important framework of understanding about what types of acquisitions and mergers are most likely to succeed, what methods and tools are likely to be most useful, and what actions are most likely to diminish the company’s capability for sustainable growth following the M&A transaction.

Warehouse Ownership Classification in the Interlining Industry

Facing with the fierce competition in the global market, each manufacturer is putting every effort to develop its own competitive edge. This is especially true in the interlining industry. One of the aspects for an interlining supplier to achieve competitive edge is to lowering costs while increasing efficiency. Whilst lowering the storage cost is a means for an interlining supplier to focus on. Before making a strategic planning to lower the storage cost, an interlining supplier is necessary to understand the basic concept of warehouse ownership classification.

Warehouses in the manufacturing industries are generally classified by the ownership. Under this idea, warehouses can be classified as private warehouses, public warehouses and contract warehouses.

1. Private Warehouse

A private warehouse, as a type of warehouse ownership classification, is operated by the firms or organization that owning the products stored in the facility. These firms or organizations may be factories, trading companies or wholesalers. The building of the warehouse can be owned or leased. The critical point for a firm to decide whether to own or lease the facility is the financial concern. Sometimes it is not possible to find a proper warehouse to lease. Take an interlining supplier for example; the storage racks or other physical nature in a leased building may not be suitable for the storage for interlining products like woven interlining, non-woven interlining and fusible interlining. Under this circumstance, design and arrangement need to be taken place for construction. On the other hand, at a particular connection for logistic purposes, a firm may have difficulties in finding a warehouse for ownership.

The major benefits of a private warehouse are flexibilities, control, cost and some intangible attributes. A private warehouse is more flexible than a public one, as the operating policies and process can be adjusted to meet the special needs of a customer or the product itself. Also, a suitable course of action can be taken to meet specific requirements for logistic purposes.

Private warehouse offer stable control since the firm has the sole authority on warehouse management to optimize activities. For example, the control on warehouse operations for an interlining product like woven interlining, non-woven interlining and fusible interlining can integrate with the logistic operations of an interlining supplier.

Usually a private warehouse is considered less costly. One of the reasons is that a private warehouse is built within the manufacturing base of a supplier; therefore, the fixed and variable components may be lower than a public warehouse. Furthermore, a private warehouse is not profitable to the owner of the facility.

A private warehouse may also have intangible benefits. For instance, a warehouse with the name of an interlining supplier for woven interlining, non-woven interlining and fusible interlining may provide marketing advantages. The customers may have the perceptions of stability and reliability towards the supplier.

2. Public Warehouse

In contrast with a private warehouse, a public warehouse as another type of warehouse ownership classification is operated independently by a business to offer wide range of for-hire services related to warehousing. Such warehouses are extensively used in the logistic systems to reduce the supply chain costs. A public warehouse can be hired for a short or long-term, based on the policies of the facility and the needs of the customers.

In a financial view, lower cost on warehousing may achieve by hiring a public warehouse than owning a private warehouse. The share resources and economic scale in a public facility may result in lower operational cost. Another benefit of public warehousing is that customers like interlining supplier for woven interlining, non-woven interlining and fusible interlining do not need to spend a huge investment on the facilities. Furthermore, a public warehouse allows the users to change the number and sizes of warehouses easily to meet special demands.

Users in a same public warehouse may share scale economies by the leverage of combined requirements from users. Such leverage ranges fixed cost from to operating cost. Transportation cost may also be leveraged in a public warehouse. For example, a public facility can arrange combined customer delivery consolidation, to deliver the woven interlining products of the first interlining supplier with the non-woven interlining products of the second interlining supplier to the same destinations.

Because of its flexibility, scalability, services and variable cost, public warehouses are popular by many firms. In general, a public warehouse as a type of warehouse ownership classification can design and perform special services to meet customers’ operational requirements.

3. Contract Warehouse

A contract warehouse, as a third type of warehouse ownership classification, has the attributes of both private and public warehouses. A contract warehouse can also be understood as a customized extension of a public warehouse, which is a long-term business arrangement to provide specific and customized logistic services to the customers. It is also thought that a contract warehouse is a form of business process outsourcing in a logistic perspective. In this relationship, the client and the service supplier share risks concerning the warehousing operations.

In general, many companies tend to utilize a combination of private, public and contract warehouses. Basic knowledge of the warehouse ownership classification will serve as a managerial guide on how to develop a warehouse deployment strategy. Such warehouse planning focuses on two aspects, namely, 1) the number of warehouses required and 2) the warehouse ownership used in specific markets. The focus on these two aspects will create warehouse segmentation for specific markets, which can provide more tailored and focused logistic capabilities to customers.

4 Ways for J Nuts Manufacturers to Boost Their Sales

The yearly sales quota contributes to the success of a company. The number of products manufactured depend on the amount they sell and vice versa. This follows the longstanding supply and demand principle.

The technological advancements and changes in the way consumers behave have brought about new developments in the industry’s sales strategies. Since it is efficient for the J nuts manufacturing process, it can also be right for sales.

It is relevant to welcome innovation, especially now at both production line and sales office. These are 4 ways to help manufacturers in their efforts to boost sales and stay competitive on the market:

Sales and Marketing Alignment

Sales and marketing alignment aims to let the two groups communicate more efficiently and create goals that depend on mutual accomplishments to succeed. “Smarketing” as this sales marketing tactic is called, relies on the marketing team to give a predetermined lead number that can be followed up by the sales department. In addition, sales and marketing alignment needs a modern CRM.

J nuts manufacturing companies can measure all goals and results, therefore it is easy to boost sales just by reassessing the performance, and finding out the number of leads that they need to make the amount of sales required. Also, it lets the manufacturer decide on the things to invest in and the channels to target to have more leads.

Focus Efforts on Current Accounts

An effective way to boost revenue is through customer retention, which is the ability of a J nuts manufacturer to keep its current customers. As an example, a 5% increase in customer retention can boost revenue to up to 95%.

Targeting existing customers gives a higher turnover rate since they have a tendency to buy more products than new visitors. Because the company has already established a business relationship with them, the marketing costs of the latest offers or one-time deals are lower.

Aim for New Accounts Rather than New Markets

All customers have their own reasons and pain points to consider buying various products. Their motives can range widely therefore it is critical to treat every potential buyer in a different way and create a pitch that targets them in particular.

A sales team can contact potential customers to start communication and ask questions to know their pain points. This information will be the basis on which the J nuts manufacturing company will draft a customized sales offer to be presented to the prospect.

This may take longer to prepare, but it is a more effective way to land sales as compared to sending a regular sales pitch out to the market.

Nurture and Develop Consumer Fans

80% of sales revenue comes from only 20% of their consumer base, as per Pareto’s law. To give it a try, they have to nurture high potential buyers and do the necessary steps to convert an additional 10% to 20% to join that group.

Using a solid content marketing strategy is a cost-effective way to achieve this. When offering free educational materials about products like blog posts, webinars, tutorials and guides, they care for these valuable accounts and lead them to the right direction.

Eventually, the J nuts manufacturing company will win real fans that have the capability to keep their business from falling.

Partners & Suppliers in the Oil & Gas Services Sector – Part 2

9. Prosafe ASA (Norway)

Prosafe operates globally and has about 340 employees. The company is headquartered in Larnaca, Cyprus and is listed on the Oslo Stock Exchange with ticker code PRS. Operating profit reached USD 222.2 million in 2007.

Prosafe comprises a parent company and the business division Offshore Support Services, the world’s leading owner and operator of semi-sumbersible accommodation/service rigs.

Prosafe has more than three decades of operational experience from the world’s largest oil and gas provinces. With an excellent uptime record, a solid financial performance and the ability to offer innovative in house technology and cost-efficient solutions, the company has positioned itself as a provider of high quality services.

Prosafe owns and operates 12 accommodation rigs (flotels).

10. Reservoir Exploration Technology (Norway)

Reservoir Exploration Technology ASA (RXT) is a marine geophysical company specialising in multi component seismic sea-floor acquisition.

Until May 2006 RXT has been operating one crew in the Gulf of Mexico, a dual vessel operation comprising a shooting vessel and a cable/buoy handler. Their GOM operations started in June 2004 and have demonstrated the superior imaging capabilities of the VSO sensors and cables.

RXT is planning a change according to the info on their site: “What we are going to do; Innovative business models to drive the marine multi-component business: In producing fields, For obstructed area long-offset applications, For time lapse 3D, Develop a “tool box” of acquisition methods (For deep water, For shallow water, For transition zone), Focus completely on what we do best: Marine acquisition.

Vision-statement: “to become the leading supplier of multi-component sea-floor acquisition.”

11. SBM Offshore (Netherlands)

SBM Offshore N.V. is a pioneer in the offshore oil and gas industry. Worldwide, we have over 4,000 employees representing 40 nationalities, and are present in 15 countries. Our activities include the engineering, supply, and offshore installation of most types of offshore terminals or related equipment. In addition, SBM Offshore owns and operates its own fleet of Floating (Production) Storage and Offloading units. SBM Offshore has a track record of developing innovative, cost-effective solutions for the ever-changing needs of its Clients. Each company of the group contributes its technical expertise, making SBM Offshore a market leader.



became a pioneer in Single Point Mooring (SPM) systems, dynamically positioned drilling vessels, jack-up drilling rigs, and heavy offshore cranes.

SBM Offshore’s present activities include the engineering, supply, and offshore installation of SPM systems for offshore loading and unloading of vessels or the permanent mooring of offshore oil production and/or storage vessels, as well as the turnkey supply of complete floating facilities for the production, storage, and export of crude oil and gas.

The latter comprise (FPSOs), (FSOs), (TLPs), (FPUs) and (MOPUs).

12. Sevan Marine (Norway)

Business Model

Sevan Marine ASA is listed on Oslo Børs (ticker SEVAN) and is specializing in building, owning and operating floating units for offshore applications. The Company has developed a cylinder shaped floater, suitable in all offshore environments. Presently Sevan Marine has four floating production, storage and offloading units (FPSOs) and three drilling units contracted to clients. The Company is also developing other application types for its cylindrical Sevan hull, including floating LNG production and power plants with CO2 capture.

The Company’s business strategy is based on a Build-Own-Operate model, which gives Sevan control over the value creation chain.

13. Saipem (Italy)

“The Group is now the largest, most powerful, most international and best balanced turnkey contractor in the oil and gas industry.” The organization has been rationalised into three global business units: Onshore, Offshore and Drilling. It enjoys a superior competitive position for the provision of EPIC/EPC services to the oil industry both onshore and offshore; with a particular focus on the toughest and most technologically challenging projects – activities in remote areas, deepwater, gas, difficult oil.

Along with its strong European content, the major part of its human resource base comes from developing countries. Saipem employs over 30,000 people comprising more than 100 nationalities… it employs large numbers of people from the most cost effective developing countries … and has sizeable service bases in India, Croatia, Romania and Indonesia.

Saipem has a distinctive Health & Safety Environment Management System and its Quality Management System has been granted ISO 9001:2000 certification by Lloyd’s Register Certification.

14. Subsea 7 (Norway)

Subsea 7 is one of the world’s leading engineering and construction companies offering all the expertise and assets that make Subsea Umbilical, Riser and Flowline (SURF) field development and operation possible.

With a multi-national workforce in excess of 5,000 personnel, the company’s offshore operations are supported out of the North Sea, Africa, Brazil, Gulf of Mexico and Asia Pacific.

Subsea 7’s experienced and skilled project managers and experienced engineers offer all the disciplines that make subsea oil & gas development and operation possible, including complete EPIC services, and life of field IRM services.

These services are supported by a modern fleet of pipelay, construction, diving and ROV support vessels. Global Operations include logistical and spool bases which are supported by dedicated in-house survey and positioning resources together with technology development, including robotic intervention services.

“Our deep-rooted health, safety, environmental and quality culture is inherent in all we have achieved to date and remains the pivotal foundations of performance.”

15. Technip (France)

Engineering, technologies and construction services for Oil and Gas, Petrochemical and other industries.

“Backed by 50 years of experience and thanks to the expertise and know-how of its teams, Technip is a key contributor to the development of technologies and sustainable solutions for the exploitation of the world’s energy resources.”

2007 key figures: 23,000 employees in 46 countries, Industrial assets on five continents, A fleet of 19 vessels by 2010, Operating income from recurring activities: EUR247 million, Revenues: close to EUR 7.9 billion.

Fields: subsea, offshore and onshore.

16. TGS Nopec (Norway)

TGS-NOPEC Geophysical Company (TGS) is a principal resource for global non-exclusive geoscientific data products and services in the oil and gas industry. Countries worldwide have entrusted TGS to assist with licensing rounds and the preparation of regional data programs. This global presence, which includes offshore surveys conducted in more than two dozen nations, is made possible by a diverse staff on three continents. Success in this competitive marketplace reflects a proud reputation for benchmark quality and personalized service.

1. Geophysical products & services. TGS specializes in the design, acquisition and processing of 2D and 3D multi-client seismic surveys worldwide.

2. Geological Data products & services. An industry-leading digital well log collection, well data management & services, multi-client interpretive products and subsurface consulting are also available from TGS.

3. Imaging Services. TGS delivers advanced high performance imaging and software solutions to support its geoscience data programs.

17. John Wood Group (GB Scotland)

Wood Group is an international energy services company with $4.4bn sales, employing approximately 25,000 people worldwide and operating in 46 countries.

Wood Group is an international energy services company with more than $4.4bn sales, employing approximately 25,000 people worldwide and operating in 46 countries.

The Group has three businesses – Engineering & Production Facilities, Well Support and Gas Turbine Services – providing a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide.

Wood Group is among the global market leaders in: deepwater engineering, offshore pipelines, artificial lift using electric submersible pumps, enhancement of oil & gas production in mature fields, the repair and overhaul of industrial gas turbines.

Wood group focuses on three areas: 1.Engineering and production facilities. Greenfield, infield engeineering, production enhancement and maintenance. 2. Well support and 3. Gas Turbine services. (*)

(*) – Information gathered from the companies websites…

H.J.B.

Understanding Marketing – An Overview of Strategies, Costs, Dangers and Risks

What is Marketing?

Marketing is a business discipline through which the targeted consumer is influenced to react positively to an offer. This can relate to the purchase of a product or a service, the joining of an organization, the endorsement of a candidate or ideology, the contribution or investment in a cause or company, or a variety of other choices of response.

The marketer can use a number of techniques to reach the consumer which can be based on artistic or scientific strategies, or a combination of the two.

Usually, the consumer is identified as a member of a particular segment of the populace, known as a market. For example, markets can be defined by age, income, area of residence, home value, interest, buying habits, industry or profession, etc., which facilitates and simplifies the marketing process. Knowing to whom the marketing effort is appealing greatly assists the marketer in developing appropriate language, reasoning and incentives to find success in its marketing efforts.

Choosing to target a particular market as opposed to the entire universe also greatly controls marketing expenditures but also may limit response. If anyone anywhere can be a customer, sales expectations may be higher but marketing costs will certainly also need to be higher as well with such a huge target as its goal.

To address this dilemma, more creative means of marketing are sometimes utilized to assist with marketing message delivery. If what is being marketed is considered newsworthy and of public interest, editorial coverage in the media can greatly assist marketing efforts. Since this usually is not reliant on major marketing funds other than what is needed to support the development, distribution, and yes, marketing of press releases to editors and publishers, the advantages of such publicity can be priceless, albeit usually miraculous on such a large scale.

Marketing is everywhere!

Everywhere we turn, everything we do is somehow connected to marketing, whether we have been induced to participate in some activity because of it or develop an interest in some idea as a result of it. Whether we realize it or not, there are personal, political or commercial agendas cloaked as news we read in the paper, behind the books, movies and music we experience as part of our culture, and within the confines of our stores and supermarkets where we shop. Of course, we easily recognize the blatant marketing efforts that reach us through direct mail, media advertising, and all over the Internet including the spam we receive ad nauseum. Marketing has become one of the most all-pervasive elements of life and we are fools if we do not question the validity or innocence of everything we read, see and hear.

Marketing is communication and education!

In order to be successful in business marketing, the customer must be reached in a variety of ways. First of all, not every customer gets the daily paper or listens to local radio. We have limited knowledge of which TV station they may watch, where they shop, what roads they travel or where they dine. Depending on what we are marketing, we may have to utilize a whole assortment of avenues of marketing to get their attention. And, if we reach them just once, that is hardly enough to make a lasting impression. Marketing is necessary on a repeated basis in a diverse number of ways in an ever-changing presentation to assure that every customer can relate to it in some way, learn what we are offering and understand how it can benefit them. To achieve long-term customer loyalty, the targeted consumer needs to be coddled into familiarity with what we are selling so they feel it is something they truly want as opposed to having it forced upon them as something they desperately need, only to find out later they were tricked!

Marketing Sounds Expensive!

Yes, marketing can get pricey particularly if it is done on a consistent basis. But in today’s world, we have marketing options we never had even twenty or thirty years ago. Now, instead of paying for expensive printing and postage to mail a brochure or postcard to a targeted consumer, we can utilize email marketing, website presentations or online banner ads to reach the same market, usually at a fraction of the cost. Today, instead of buying expensive print advertising, we can work on improving our website’s SEO (search engine optimization) – (something we can do for free, if we are so inclined) so that people in need of what we offer can find us through Internet searches, rather than our trying to find them at an astronomical expense.

What About Social Media Marketing?

In addition to alternative marketing options already mentioned, there is the latest craze for Facebook, Twitter, LinkedIn, and other incredibly popular social media where people, young and old, spend hours developing relationships with “friends” they may never have met or ever will meet. Yet they share intense secrets of their deepest thoughts and desires as well as actual photographic representations of the same which sometimes land people in trouble with the law, or at the very least, their employer, school or parents.

Whether social media marketing is a worthwhile endeavor for businesses remains to be seen since businesses rarely accumulate millions of followers the way celebrities do. But as a way for customers to interact with a business for which they may have developed a fondness cannot be disputed. Can this translate into more sales for the business? We’ll have to wait and see, while continuing to devote precious time to composing meaningful 140-character tweets and building a Facebook “persona” for the business. From this writer’s standpoint, the only worthwhile social medium for business is that of LinkedIn since it provides a serious platform on which to create a business résumé where anyone interested in your professional stature can quickly summarize your capabilities, experience and accomplishments.

Marketing Can Be Intuitive

Much of what becomes marketing strategy is based more on common sense than on some mysterious scientific formula. As we see on a daily basis in stock market gyrations as well as political leanings, the herd mentality rules. On any particular day, if the Japanese or European stock or bond markets are selling off for one reason or another, you can safely bet that the U.S. markets will follow suit. And in any political race, as we are witnessing in the U.S. presidential primaries, the more one candidate gains ground, baby step by baby step, the more likely that candidate will become the Party nominee. Today’s world is governed by a minute-by-minute opinion survey measured by the endlessly publicized polls where people see what other people are thinking and use those results to form their own opinions. Monkey see, monkey do. The same holds true for marketing.

If we are told that a certain brand of coffee is the leading brand in America, we will probably believe what we are told, assume it tastes best, perhaps buy it ourselves regardless of cost, and perhaps adopt it as our own favorite. All because we were told everyone else was doing it. Safety in numbers, as they say.

It is ironic that those who become successful marketers usually dwell on the outskirts of the herd, have a more astute grasp of mass psychology, and approach business and life in a more innovative, creative and unique way, a mindset they use to formulate the next marketing phenomenon. The world is made up of leaders and followers: a few choice leaders and a glut of followers. It takes a lot more gumption to become a leader than it does to join the herd. That’s why marketing is a profession based in psychological control by a choice few over the mindless masses who have no initiative or courage to decide for themselves.

What is the difference between marketing and selling?

Selling is one aspect of the greater process of marketing. Marketing begins long before the product or service is even ready to sell. Marketing encompasses the concept, naming, branding and promoting of the offer while selling is the much more individualized effort to convince a lead who has possibly responded to the marketing offer to make the purchase. You can’t have one without the other, at least not easily. Marketing is a process by which we strive to reach the final goal of making the sale. Without marketing, the sales process is extremely difficult because the entire onus of educating the consumer about the offer is on the shoulders of the sales representative. On the other hand, if marketing has been successful, the sales rep can waltz in knowing the consumer is well apprised of the offer and can work his magic to convert the prospect into a satisfied customer.

What are some of the instruments of marketing?

There are many ways to market an offer, some of which are expensive, and others of which can be free. The methods we use that cost us dearly may not work as well as some of those we receive as a gift. Among the costly ways are media advertising, direct mail, conference presentations, distribution of printed literature, online advertising, email marketing, etc. Of those that are free are efforts referred to as guerrilla marketing, which are things we do ourselves to spread the word, network and publicize what we are offering. This can include posting flyers on bulletin boards in supermarkets, libraries, delis, small shops, and government offices, etc. Every time we add a tag to our emails where people can click to go to our website, we are using guerrilla marketing at no cost. Making sure we are easily found in Internet searches through search engine optimization of our website or other online presence, is an excellent way to achieve free marketing. One way to do this is to register your company or organization on every possible free online directory in your industry, region or interest group which translates into exponential growth as time passes.

What is viral marketing?

Viral marketing (as it relates to the word “virus,” meaning contagious and capable of spreading) is another means of free promotion facilitated by shrewd decisions we can make to further our cause. The easiest way to define viral marketing is that which is communicated via “word-of-mouth.” Related to the herd mentality discussed above, if a friend or business acquaintance mentions a product or service in a favorable light, we will be much more inclined to remember it and check it out. This can happen in a business meeting, at a mall, at a soccer game or over lunch. However, since most of us spend so much time on the Internet, it can happen practically everywhere we turn by clicking on the “like” buttons on Facebook or the “1” button on Google, among others. These are our personal endorsements where we give a “thumbs up” to something we have experienced and want to share with our friends so they too can enjoy it. Getting your offerings out with such buttons attached can result in viral marketing in your favor.

Viral marketing can have powerful repercussions as experienced by one client with an online auto accessories store. Many of his customers frequent online special interest forums related to the model of car they drive where members discuss products they have installed and the source of their purchase, followed by a link to his referenced website. Such referrals are repeated in other ensuing discussions, multiplying the number of links back to his site, increasing the power of his SEO and catapulting him to the tops of Internet searches for what he sells. He paid nothing for this phenomenon of parlayed good fortune except the daily effort he consistently expends to offer top quality merchandise and equally excellent customer service.

Do you need marketing?

If you are in business, of course you do. While you can attempt to do as much of it as you can on your own, it is advised that you begin with a reliable base of professional name, logo, website and search engine optimization to get started on the right foot. From there, you can work on promotion via guerrilla marketing and seek professional marketing services as needed for special needs, like a strong, effective ad to run, the development of professional sales literature to distribute at an upcoming show, or a direct mail promotion to your list of repeat customers, for example. Some business people choose to handle their own taxes to save on the cost of using an accountant for such critical functions at the risk of getting audited. Likewise, you can certainly attempt to produce marketing tools yourself but for long-term branding purposes and best return on investment, it is advisable to leave marketing development to the professionals.

Niches Lead to Riches

It doesn’t matter WHAT your niche is.

It only matters THAT you have one.

AFTER ALL: Niches lead to riches.

Now, there are two potential types of niches you can leverage:

1. Niche Expertise

2. Niche Market

Having a Niche Expertise means you know a LOT about a SPECIFIC TOPIC that applies to a WIDE AUDIENCE.

So, it’s the answer to the question:

1. What, specifically, are you known FOR?

2. What word do you want to OWN?

FOR EXAMPLE: Let’s say you’re a consultant whose expertise is on how to handle angry, pissed off or difficult customers.

Fantastic! That’s what you’re known FOR.

And the good news is, entrepreneurs with Niche Expertise have several advantages:

They become a big fish in a big pond.

They apply their knowledge cross industrial.

They open wide doors for expanding their businesses.

They diversify their client base, which leads to new business.

They become the obvious expert sought out by the mainstream media.

They allow new markets to add multiple dimensions to their single topic.

Dave Jackson is a good example of this. He’s “The Angry Customer Guy.”

That’s Niche Expertise.

On the other hand, having a Niche Market means you know a LOT about a SPECIFIC GROUP OF PEOPLE to whom you apply MANY TOPICS.

So, it’s the answer to the questions:

1. Whom, specifically, are you known BY?

2. What industry do you want to DOMINATE?

FOR EXAMPLE: Let’s say you’re a consultant who works solely in the Jewelry Retail Industry.

Awesome! That’s whom you’re known BY.

And the good news is, entrepreneurs with a Niche Market have several advantages:

They become a big fish in a small pond.

They apply their knowledge cross-topical.

They open deep doors for expanding their businesses.

They specialize their client base, which leads to repeat business.

They become the obvious expert sought out by industry and trade media.

They allow industry trends to add multiple dimensions to their various topics.

Shane Decker is a good example of this. He’s “The Jewelry Store Guy.”

That’s a Niche Market.

Now, occasionally you will run into entrepreneurs that have both a Niche Topic AND a Niche Market.

FOR EXAMPLE: How to handle angry, pissed off or difficult customers … who shop at retail jewelry stores.

That’s a SUPER Niche!

And although it’s rare, if you can pull it off … good on ya!

You get the best of both worlds.

Either way, you MUST remember this process:

1. Focus first; THEN spray. Either covering your topic or your industry.

2. Develop specialized knowledge. Either about your topic or about your industry.

3. Pick a lane. Either the topic lane or the industry lane.

4. Go with gusto! Either about your topic or about your industry.

5. Become That Guy. Either “for” the topic or “by” the market.

REMEMBER: People prefer specialists.

Turn your niches into riches.

LET ME ASK YA THIS…

Are you niching?

LET ME SUGGEST THIS…

For the list called, “46 Marketing Mistakes Your Company Is (Probably) Making,” send an email to me, and I’ll send you the list for free!

4Ps & 6Ps – Marketing Mix

Marketing mix is one of the major concepts of marketing. According to the traditional base, there are 4Ps of marketing. These are referred to as the marketing mix. But in the modern use of the term, many more Ps have been coined. People have found six, seven even eleven Ps of marketing. In this article we will talk about the 4Ps and 6Ps.

Four Ps

The four Ps of marketing mix consist of Product, Price, Place and Promotion. Product means the thing that you are selling. It can also be a service like the tourism industry.

Price means the rate at which the product is being sold. A number of factors are involved in determining the price of a product. These include competition, market share, product identity, material costs and the value customers perceive of a product. In fact prices are also determined by competitor’s products. If the competitors have the same product, then the price of a product will go down.

Place refers to the real or virtual place from where a product can be bought by a consumer. Another name used for place is called “distribution channel”. Promotion is the way that a product will be communicated to the general public. There are four distinct ways in which this might be done- ‘point of sale’, ‘word of mouth’, public relations and advertising.

Somewhere down the line people felt that four Ps were not enough for marketing mix. It had to face a lot of criticism mainly on the grounds that it was extremely product focused. This was not enough for the economy which is based a lot on services as well nowadays.

Another criticism that marketing mix has to face is that it does not have a ‘purpose’. So it should be looked upon as a tool that sets marketing strategy. Another criticism of marketing mix is that it does not discuss customers. This is why the concept of Six Ps of Marketing mix has achieved relevance.

Six Ps

The six Ps contain all the four Ps of marketing – product, price, place and promotion. In addition, it contains, two new Ps, namely People and Performance.

People include the potential and current customers of the business and how they make their purchase decisions. Market segmentation is also a part of this. It contains the features of market segmentation and the most attractive segments of this market.

The next P is Performance. This implies the performance of the business. The financial and strategic objectives of the business are dealt with here. It is also seen whether these objectives are achievable and realistic or not. The metrics of financial performance are also seen and appropriated in this division.

The six Ps of marketing mix help to overcome the criticisms of the four Ps. Hence the 6Ps serve to be a better alternative as compared to the 4Ps of marketing mix.

Strategy of Foreign Direct Investment (FDI)

Owing to globalization and removal of trade barriers between countries international business has expanded and National Companies have been able to widen their horizons and become a strong Multinational Companies (MNCs). However, a decision to enter a new market and undertake a foreign direct investment is risky therefore a decision to make this step must be started with a self assessment. What are the core motives of pursuing this strategy? Does the firm have a sustainable competitive advantage? Where to invest? How to invest? Use direct investment or joint ventures, franchising, licensing, acquisitions of existing operations, establishing new foreign subsidiaries or just exporting. What is country risk and how to benefit from it? Further we will try to answer these questions.

Companies consider Foreign Direct Investment (FDI) because it can improve their profitability and strengthen shareholders wealth. Mainly they have two motives to undertake FDI. Revenue related and cost related motives. One of revenue related motives is to attract new sources of demand.A Company often reaches a moment where growth limited in a local market so it searches for new sources of demand in foreign countries. Some MNCs perceived developing countries such as Chile, Mexico, China, and Hungary such as an attractive source of demand and gained considerable market share. Other revenue related motive is to enter profitable markets. If other companies in the industry have proved that superior earnings can be realized in certain markets, a National Company may also decide to sell in those markets.

Some Companies exploit monopolistic advantage. If a National Company possesses advanced technology and has taken an advantage of it in domestic market, the company can attempt to exploit it internationally as well. In fact, the company may have a more distinct advantage in markets that have less advanced technology. Apart from revenue motives companies engage in FDI in an effort to reduce costs. One of typical motives of Companies that are trying to cut costs is to use foreign factors of production. Some Companies often attempt to set up production facilities in locations where land and labor costs are cheap. Many U.S based MNCs such as, Ford Motor and General Motors established subsidiaries in Mexico to achieve lower labor costs. Also, a company can cut costs by economies of scale. In addition to above stated motives companies may decide to use foreign raw materials. Due to transportation costs, a company may exclude importing raw materials from a given country if it plans to sell the finished goods back to that country. Under such circumstances, a more attractive way is to produce a product in the country where the raw materials are located.

After defining their motives managers of National Companies need to examine their domestic competitive advantages that enabled them to remain in a home market. This competitive advantage must be unique and powerful enough to recompense for possible disadvantages of operating abroad. The first comparative advantage National Companies can have is of economies of scale. It can be developed in production, finance, marketing, transportation, research and development, and purchasing. All of these niches have a comparative advantage of being large in size due to domestic or foreign operations. Economies of production come from large-scale automated plant and equipment or rationalization of production through worldwide specializations.

For example, automobile manufacturers rationalize production of automobile parts in one country, assemble it in another and sell in the third country with the location being stated by comparative advantage. Marketing economies occur when companies are large enough to use most advanced media that can provide with worldwide identification. Financial economies can be derived from availability of diverse financial instruments and resources. Purchasing economies come from large scale discounts and market power. Apart from economies of scale flourishing Companies benefit from comparative advantage in managerial and marketing expertise. Managerial expertise is an ability to manage large scale industrial organizations in foreign markets. This expertise is practically acquired skill. Most MNCs develop managerial expertise through prior foreign experience. Before making investments they initially source raw materials and human capital in other countries and overcome the supposed superior local knowledge of host country companies.

The third comparative advantage can be a possession of advanced technology. Usually, companies located in developed countries have access to up-to-date technologies and effectively use them as superiority. The fourth advantage is developing differentiated products so other firms unable to copy. Such products originate from profound research based innovations or marketing expenditures. It is difficult and costly for competitors to duplicate such products as it takes time and resources. A National Company that created and marketed such products profitably in a home market can do so in a foreign market with substantial efforts. After examining their comparative advantages companies decide where to invest. The decision where to invest is influenced by behavioral and economic factors as well as of the company’s historical development. Their first investment decision is not the same as their subsequent decisions. The companies learn from their first few foreign experiences than what they learn will influence their following investments. This process is complex which includes analysis of several factors and following various steps. In theory after defining its comparative advantage a company searches worldwide for market imperfections and comparative advantage until it finds a country where it can gain large competitive advantage to generate risk adjusted return above company`s rate. Once choice is made National Company will choose mode of entry into foreign market. Companies use several modes of entry into other countries.

The most common ways are:

• International trade

• Licensing

• Franchising

• Joint ventures

• Acquisitions of existing operations

• Establishing new foreign subsidiaries

Each method is discussed in turn with risk and return characteristics. International trade is a traditional approach that can be used by firms to penetrate markets by exporting or importing goods. This approach causes minimal risk because firms do not place large amount of their capital at risk. If the firm experiences a decline in its exporting it can normally decrease or discontinue this part of its business at a low cost.

Licensing is a popular method for National Companies to profit from international business without investing sizable funds. It requires companies to provide their technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other particular benefits. Licensing enables them to use their technology in foreign markets without a major investment in foreign countries and without the transportation costs that result from exporting. As local producer is located domestically it allows minimizing political risks. A major disadvantage of licensing is that it is difficult for company providing the technology to ensure quality control in the foreign production process. Other disadvantages include: are lower licensee fees than FDI profits, high agency cost, risk that technology will be stolen, loss of opportunity to enter licensee`s market with FDI later.

A joint venture is defined as a foreign ownership that is jointly owned. Companies penetrate foreign markets by engaging in a joint venture with firms that reside in those markets. A business unit that is owned less than 50 percent is called a foreign affiliate and joint venture falls into this category. Joint Venture with a foreign company is effective method if National Company finds a right partner. Advantages of having such partner are as follows: local partner is familiar with business environment in his country, can provide competent management, can provide with a technology that can be used in production or worldwide and the public image of the firm that is partly locally owned can increase sales and reputation. The most important is joint ventures allow two companies to apply their comparative advantage in projects. Despite notable advantages this method has disadvantages too. MNCs may fear interference by local companies in certain important decision areas. Indeed what is optimal from the point of one partner can be suboptimal for the other. Also, partners may have different views concerning dividends and financing.

Acquisition of existing operations or cross border acquisition is a purchase of an existing foreign-based firm or affiliate. Because of large investment required an acquisition of an existing company is subject to the risk of large losses.

Because of the risks involved some firms involve in partial acquisitions instead of full acquisitions. This requires a smaller investment than full international acquisitions and therefore exposes the firm to less risk. On the other hand, the firm will not have complete control over foreign operations that are only partially acquired.

Companies can also penetrate foreign markets by establishing their subsidiaries on these markets. Like to foreign acquisitions, this method requires large investment. Establishing a subsidiary may be preferred over foreign acquisition because in a subsidiary procedures can be tailored exactly to company standards. Plus less investment may be required than buying full acquisition. Still company cannot benefit from operating a foreign subsidiary unless it builds a steady customer base.

Any method that requires a direct investment in foreign operations is referred to as a foreign direct investment. International trade and licensing is not considered to be FDI because it doesn`t require direct investment in foreign operations. Franchising and joint ventures involve some investment but to a limited degree. Acquisitions and new subsidiaries require large investment therefore represent a large proportion of FDI. Many International Companies use a combination of methods to increase international business. For example the evolution of Nike began in 1962 when a business student at Stanford`s business school, wrote a paper on how a U.S. firm could use Japanese technology to break the German dominance of the athletic shoe industry in the United States. After graduation, he visited the Unitsuka Tiger shoe company in Japan. He made a licensing agreement with that company to produce a shoe that he sold in the United States under name Blue Ribbon Sports (BRS). In 1972, he exported his shoes to Canada. In 1974, he expanded his operations into Australia. In 1977, the company licensed factories in Korea and Taiwan to produce athletic shoes and then sold them in Asia. In 1978, BRS became Nike, Inc., and began to export shoes to Europe and South America. As a result of its exporting and its direct foreign investment, Nike’s international sales reached $1billion by 1997 and more than $7 billion by 2010.

A decision of why companies undertake FDI compared to other modes of entry can be explained by OLI paradigm. The paradigm tries to explain why companies choose FDI compared to other modes of entry such as licensing, joint ventures, franchising. The OLI paradigm states that a company first must have “O”- owner specific competitive advantage in a home market that can be transferred into a foreign market. Then the company must be attracted by “L”- location specific characteristics of a foreign market. These characteristics might include low cost of raw materials and labor, a large domestic market, unique sources of raw materials, or advanced technological centers. Location is important because the company have different FDI motives. By relying to location characteristics it can pursue different FDIs. It can implement either horizontal or vertical FDIs. The horizontal FDI occurs when a company locates a plant abroad in order to improve its market access to foreign consumers. Vertical FDI, by contrast, is not mainly or even necessarily aimed at selling in a foreign country but to cutting costs by using lower production costs there. The “I” stands for internalization. According to the theory the company can maintain its competitive advantage if it fully controls the entire value chain in its industry. The fully owned MNC minimizes agency costs resulted from asymmetric information, lack of trust, monitoring partners, suppliers and financial institutions. Self financing eliminates monitoring of debt contracts on foreign subsidiaries that are financed locally or by joint ventures. If a company has a low global cost and high availability of capital why share it with joint ventures, suppliers, distributers, licensees, or local banks that probably have higher cost of capital.

Properly managed FDI can make high returns. However FDI requires an extensive research and investment therefore puts much of capital at risk. Moreover, if company will not perform as well as expected, it may have difficulty selling the foreign project it created. Given these return and risk characteristics of DFI, Companies need to conducts country risk analysis to determine whether to make investments to a particular country or not. Country risk analysis can be used to observe countries where the MNCs is currently doing or planning to do business. If the level of country risk of a certain country begins to increase, the MNC may consider divesting its subsidiaries located there. Country risk can be divided into country`s political and financial risk.

Common forms of political risk include:

• Attitude of consumers in the host country

• Actions of host country

• Blockage of fund transfers

• Currency inconvertibility

• War

• Bureaucracy

• Corruption

A severe form of political risk is the likelihood that the host country will take over a subsidiary. In some cases, some compensation will be paid by the host government. In the other cases, the assets will be confiscated without compensation. Expropriation can take place peacefully or by force.

Beside political factors, financial aspects need to be considered in assessing country risk. One of the most clear financial factors is the current and potential state of the country’s economy. An MNC that exports to a foreign country or operates a subsidiary in that country is highly influenced by that country’s demand for its products. This demand is, in turn, strongly influenced by the country’s economy. A recession in that country can reduce demand for MNC `s exports or goods produced by its subsidiary.

Economic growth indicators positively or negatively can have an effect on demand for products. For instance, a low interest rates boost economy ad increase demand for MNCs` goods. Inflation rate influence customers purchasing power therefore their demand for MNC`s goods. Furthermore exchange rates capable to press on the demand for the country’s exports, which then affects the country’s production and level of income. Strong currency might reduce demand for the country’s exports, increase the volume of products imported by the country, and therefore reduce the production of country and national income.

Assume that Papa and Sons plans to build a plant in Country A. It has used country risk analysis technique and quantitative analysis to derive ratings for various political and financial factors. The purpose is to consolidate the ratings to derive an overall country risk rating. The Exhibit illustrates Papa and Sons country risk assessment. Notice in Exhibit that two political factors and five financial factors contribute to the overall country risk rating in this example. Papa and Sons will consider projects only in countries that have a country risk rating of 3.5 or higher. Based on its country risk rating Papa and Sons will not build a plant in Country A.

If the country risk is too high, then the company does not need to investigate the achievability of the proposed project any further. But some companies may undertake their projects with country risk being high. Their reasoning is that if the potential return is high enough, the project is worth undertaking. When employee safety is a concern, however, the project may be rejected regardless of its potential return. Even after a project is accepted and implemented, the MNC must continue to monitor country risk. Since country risk can change dramatically over time, periodic reassessment is required, especially for less stable countries.

Nypro Case Study

Financials & Profits

Nypro’s financial statements display a growth in Net profit (before-taxes) of about 7.5-8% between 1992- 1995, whereas before-tax profits averaged only 4% in the industry. Nypro ranked 10th in size among the 40,000 firms in the plastic injection molding industry (Block, 1996).

If we now flip to 2006-2008, we see that Nypro’s net margin has dropped to around 3.5% of sales. Nypro was a pioneer in creating differentiating processes, technologies and culture in their organization. However, Nypro’s advancements did not constitute a truly unique and inimitable capability. Process improvements have been difficult to sustain competitive advantages against competitors beyond the short-term. Competitors are able to readily incorporate new production or process techniques shown to improve profit performance through cost, quality and customer satisfaction advantages. Over the last decade, it seems that Nypro has not been able to maintain it’s superior performance in the industry, which denotes the company’s inability to develop an inimitable competitive advantage.

The plastics molding industry possesses almost insignificant entry barriers, low differentiation, and several smaller producers serving a niche, and offering low value-add to the industry. With technological and process emulation, how then does a company excel and differentiate, especially considering the low entry barriers and the inability to significantly differentiate? The answer is to innovate; to become an industry leader, and to remain on the industry’s cutting edge. Nypro has taken this challenge to heart, empowering its employees to facilitate success and to continue stewardship and development of proprietary technology through efforts such as its revolutionary Nova-plast machine.

Market Power

Nypro is part of the Plastic Containers Industry, which is a fragmented competitive industry. In 1995, Nypro was the leader in the plastic injection molding industry among companies that did not focus on automobile industry. Nypro’s customer base is divided into three main categories – consumer/industrial (about 32.2 % of sales), health care (about 46.7% of sales) and electronics (about 21.1% of sales). Nypro needs to identify the profit margin associated with each of these market segments along with the technological advances in these consumer industries. This will help the company analyze which customers will benefit the most from their improved capability and be able to take advantage of the cost savings to counter market competition.

Strategically, in terms of organization structure, Nypro set up medium sized production plants geographically close to its major customers. This created some economies in terms of transportation costs and gave the customer a much more local interface with the company.

Nypro followed the model of an Operating Board in its plants which allowed for maximum participation and engagement. The Board consisted of operational managers from other plants which kept information flowing freely through the organization. Nypro encouraged competition and intrapreneurship among its own plants. This encouraged creativity and idea generation to increase competitiveness in the marketplace.

However, the decentralized innovation strategy precludes the derivation of profit enhancing efficiencies. Although management has sought a localized and client-centric plant strategy, the absence of standardized production approaches codified by Nypro’s industry groups limits scale economies, slows the economies of learning, and more importantly elevates overall cost of products sold and material costs given wide disparities in utilization and cost structures across the company’s various plant assets. As shown by the following table, management has yet to compress the range of material utilization and material costs, which lowers profits and the company’s market power.

Further, the incohesive production approaches has also revealed inconsistent product quality. The following table illustrates the wide disparities between production plants.

The sharing of high visibility innovation has seemingly foreshadowed the accomplishments of plant assets to satiate customers through delivery of high-quality products and the limited costs of product returns. Although post-installation customer satisfaction measurement was not apart of the company’s performance template, it does have real implications to the Nypro cost structure and customer perceptions concerning product quality both of which hold quantifiable impact on market power (i.e., lower client satisfaction and reduced future sales).

In 2008, Nypro is focusing on achieving balance in their three key market areas. Their strategy is to position themselves as a ‘Go To Strategic Partner’ among clients. They have increasing partnerships with esteemed companies like Estee Lauder and P&G’s – Flawless brand of Secret deodorant.

Growth / Innovation

Differentiation and innovation strategies require a strong integration with the environment, the customers, and the technology suppliers. In terms of the Miles & Snow Typology, Nypro played the role of a prospector, i.e. being innovation oriented exploiting new product and growth strategies.

The plastic injection molding industry was a fragmented industry characterized by perfect competition. There were no barriers to entry and many new potential entrants into the market. This meant that buyers had negotiating power over firms that provided similar products. Lankton realized that in order to sustain Nypro among its competitors, he had to introduce technological innovations that would provide the customers cost and quality advantage. He also consolidated Nypro’s business to focus on large companies that could provide bigger orders and were introducing product innovations themselves. This meant that Nypro would grow with their customers and be ahead of the technology innovation curve in the market.

Nypro operated in a team structure where a Development team developed product specs and was responsible through the production phase. Every project & product was then followed by the Continuous Improvement team that represented all the different aspects of the firm and concentrated on innovating the product and process for the customer. These teams worked closely with the customer to maintain quality standards or change processes or product specs based on any feedback from end consumers or competitors’ challenges. This ability to share internal processes with clients brought a close partnership and resulted in product and process efficiencies for both teams.

The NovaPlast could further expand the company’s penetration of customer accounts, providing additional value-added services to clients: low-volume, specialized moldings. NovaPlast permits Nypro to maintain the client relationship and the accompanying revenues without outsourcing low-volume jobs to potential competitors. The customized molding permits the company to set higher pricing and margins given the specialty moldings set to customer specifications. Lower volume levels could be offset with higher pricing to recoup research and development costs

The other innovations that Nypro implemented included clean plant design, visual factory design as their standard plant layout.

Resources

In determining its strategy, Nypro had more of a resource-based view of the firm where they evaluated how to make innovation a core competence in the organization. Lankton was perceptive to find the value creation zone in the plastic injection molding industry by combining his customer’s needs and competitor’s lack of differentiation.

Lankton also invested significantly in changing the culture and retaining talent resources at Nypro. Valuable employees received stock options and as shareholders received the opportunity to select the Board of Directors for Nypro. Performance measures were always comparisons between plants and teams i.e. more collective than individualistic. These performance measurements included evaluating customer’s end product success, customer’s strategic market goals, any improvement in cost and profit margins, cycle time and gaining additional contracts.

The company’s labor capital and decentralized innovation process serves as Nypro’s crucial resource and knowledge capital. In addition, the organizational culture is one of creative tension through internal competition with Lankton’s competitive culture the cohesive dynamic spurring innovation and propagating silos. The company’s culture feeds the knowledge system through the dispersion of process enhancements transmitted by organizational systems.

Despite the dispersion of innovation, the absence of standardized production approaches has prevented the realization of efficiency standards across company plants. This is evidenced by range of machine utilization and customer return incidence levels.

Although plant processes are customized to industry and customer standards, shareholder capital is not efficiently managed and deployed given the competitive tension preventing greater cross-unit collaboration.

Conclusion

In conclusion, Nypro implemented a number of differentiating activities in the industry like improved processes, using Continuous Improvement Teams, focusing on cycle time and precision and setting performance standards based on end customer success and team efforts. In addition, Stegmann provides that matrix and process organizational structures produce positive EVAs for corporate managers. These efforts and cultural changes did help Nypro create some long-term strategic alliances with their clients.

However, Nypro operates in a competitive market, they have to be flexible and continuously improve operations in order to stay ahead of competitors and retain or gain market share. Stegmann, further, offers, that organization strategies generating positive EVAs are task sharing and empowered employees, horizontal communication, teams, decentralized structures and decision-making, and cultural innovation.

Although the Nypro organization reflects a number of these positive EVA attributes, It is our concern that the competitive culture stymies horizontal communication. As noted earlier, plant efficiency is disparate across Nypro’s global system of plant assets. Given process innovation is limited in duration, the company would be better served to also facilitate the sharing of “less visible” production efficiencies to further derive profits, market power, and shareholder earnings. We would like to see management reduce and tighten the range of material costs as a percentage of sales, and increase machine utilization to employ idle capacity. We are not suggesting full capacity run-rates in lieu of the impact on equipment and labor, and the potential need for excess capacity for product ramp-ups by clients. However, production assets operating below 65 to 70 percent denotes more idle capacity than we would like to see.

In terms of the decision making process for implementing NovaPlast machines, Nypro operates in a constantly changing competitive environment. This means that Nypro has to be prepared to respond to changing industry and customer demands. In this scenario, it would be best for Nypro to implement NovaPlast machines in one of the plants and measure success levels and pros and cons before pushing these machines to all plants across the world.

In terms of the decision making process for implementing NovaPlast machines, Nypro operates in a constantly changing competitive environment. This means that Nypro has to be prepared to respond to changing industry and customer demands. Our Novaplast rollout plan would suggest the designation of top plants segmented by the three top industries: healthcare, consumer/industrials, and communication/electronics. This would permit a centralized innovation process predicated on industry specialization. From this basis, general industry specifications could be further specialized to incorporate the nuances featured within individual client blueprints. Although this decentralized approach may elevate costs and mitigate profits, the divisional learning could yield innovative processes and enhancements to offset development and improvement costs with higher sales.

Reference:

Block, M. (1996). An Inside Look at Nypro. American Journal of Engineering 15(2). Retrieved 05/01/2011 from the business source complete database.

Forces and Trends in Business

The corporate environment is characterized by a number of variables: competition, dynamism, turbulence, complexity and change. All organizations must develop ability to continuously and consciously transform themselves and their contexts. Such contexts include restructuring for optimum effectiveness, reengineering key processes and streamlining functions that are able to provide a source of competitive advantage. The aim is to adapt, regenerate and most important, survive. (McLean, 2006).

For a company to thrive today, strategists must find ways to increase the organization’s ability to read and react to industry and market changes. They must know their goal to boost the company’s strategic flexibility by recognizing disruptions earlier and responding faster.

Strategic flexibility or adaptability can be defined as the organization’s capacity to identify major changes in its external environments, quickly commit resources to new courses of action in response to such changes, and to recognize and act promptly when it is time to halt or reverse existing resource commitments. Being adaptable means leaders must not get stuck in a too-rigid way of looking at the world. The organization must view change as an inevitable and essential part of an organization’s growth, in order to achieve this adaptability.

When there is uncertainty or unpredictability in the environment, managers tend to focus almost all their energy on successfully executing the current strategy. What they also should be doing is preparing for an unknown future. Flexibility stems from the ability to learn; managers tend to overlook the negative and emphasize the positive. They need to understand not only what led to the positive outcomes but also what led to the negative ones. This will optimize their learning experience. According to Ford (2004) four points to foster and maintain adaptability include challenging complacency, giving all employees a voice, encouraging participative work and driving fear out of your group.

The companies chosen for this task vary by industry: a famous automobile manufacturer (Ford) a bank going through a merger (Compass) and a start-up software company (DawningStreams). Ford and Compass have been in business for a long time; it is likely they have changed their strategic plan based on changing forces and trends. DawningStreams is new (established in 2005 and incorporated in 2007). Even though they have not had their first sale and have no staff, the owners have devised several iterations of their strategy.

There is a diversity of stakeholders all that are interested in the activity of business organizations. Emphasis must be placed on their adaptability in strategic analysis and their adaptability in strategic management of business organizations. The organization must have a strategic management model.

Each company might scan the same areas, but for different reasons. Considering technological advances, Ford would prepare itself to lead the market by having various electronic equipment in their vehicles, as well as robotic equipment with which to build them and the supply chain technology to keep all in check. Compass Bank is going through a merge and expanding globally; therefore they will need to keep abreast of communication technology. DawningStreams is a software company; they will need to monitor those companies who would be their competition to ensure their product offers better functionality. All three companies would make sure potential customers would be able to get good information from internet websites and advertisement, which encompasses yet another area of technology the organizations may need/want to scan. In this instance, many members of the organization must be enrolled: upper management and finance, who will determine budgetary factors; the IT department, who will be responsible for the implementation and maintenance of some of the technology; the staff who must be trained to use the technology; a sales force who will sell the technology.

To the outside observer, it may seem unnecessary for any but Ford to scan the (actual) environment when it comes to issues such as emission control, fuel efficiency and hybrid cars. That is true however; Compass Bank and DawningStreams can plan a strategy to be friendlier to the environment (and their pocketbooks) by practicing paper reduction (through the aforementioned technology). Lastly, DawningStreams’ product may be useful as a file sharing service to environmental groups.

With regard to the legal environment, all three must be acutely aware of laws, which affect their respective industry among others. To Ford, legal applies, among other areas, to environmental protection laws and department of transportation safety laws. To Compass Bank, they would abide by the rules of the Federal Reserve (www.federalreserve.gov) and the Federal Insurance and Deposit Corporation (www.fdic.gov). DawningStreams must follow laws as they pertain to the transfer of files, which have intellectual property and also the export of products, which have algorithms. All three companies are global and will need to monitor those laws in other countries, which could effect the strategic planning.

At one company after another–from Sears to IBM to Hewlett-Packard to Searle, strategy is again a major focus in the quest for higher revenues and profits. With help from a new generation of business strategists, companies are pursuing novel ways to hatch new products, expand existing businesses, and create the markets of tomorrow. Some companies are even recreating full-fledged strategic-planning groups. United Parcel Service expects to spin out a new strategy group from its marketing department, where strategic plans are now hatched. Explains Chairman Kent C. Nelson: “Because we’re making bigger bets on investments in technology, we can’t afford to spend a whole lot of money in one direction and then find out five years later it was the wrong direction.”

In such a world we need a planning model that allows us to anticipate the future and to use this anticipation in conjunction with an analysis of our organization–its culture, mission, strengths and weaknesses–to define strategic issues, to chart our direction by developing strategic vision and plans, to define how we will implement these plans and to specify how we will evaluate how well we are implementing these plans. The fact that the world is changing as we move forward in the future demands that the process be an iterative one.

Ford Motor Company – Socio-cultural

Ford Motor Company embraces the socio-cultural changes taking place to allow the company to move in the right direction with respect to attitudes in the society. Two areas that stand out in terms of socio-cultural attitudes would be that of fuel economy and smaller cars. The growing concern by the public for better fuel economy has influenced the company’s introduction of the Ford Escape Hybrid and Mercury Mariner Hybrid. The organization is committed to the hybrid to improve fuel economy as a global strategy to meet customer demands. The increased demand in society for such environmentalism has assisted in the decision for Ford Motor Company to look forward to adding the hybrid feature to the Ford Fusion and Mercury Milan and continue in such a strategic planning direction.

The customers that use these vehicles get a substantial break on their insurance in many states and a tax credit as well while enjoying the increased mileage of a vehicle that runs on gasoline and capabilities for 100 percent electric power. The environmental scanning by Ford Motor Company has allowed the company to be knowledgeable of the fact that the people in the United States are buying more small cars today than any other type of vehicle segment. The lifestyles changes have been monitored and there is good data that shows that such a trend will continue in this direction and the expected growth in this segment will continue. The company has redesigned the inside and outside of the Ford Focus to set the car apart from the competitors in the small car segment while increasing upgrades and features to experience positive outcomes. The direction that the company is taking is based on a competitive advantage and being a leader in the industry. The vehicle line has both a sedan and a coupe to attract targeted markets including younger buyers at an entry level to build upon brand loyalty and customer retention. Ford Motor Company will continue to use the socio-cultural factors to drive the business and enjoy future success.

Ford Motor Company – Legal –

Ford Motor Company with regard to the Environmental Protection Agency adheres to the legal aspect of environmental scanning. Ford Motor Company accepted an award in March 2007 from the Environmental Protection Agency called the Energy Star 2007 Partner of the Year Award in Energy Management. The company is the first automaker to have ever been awarded the award two years in a row. The award has come to be presented due to the commitment made by the company to increase energy efficiency and to reduce the greenhouse gas emissions from all of the facilities in the company.

The organization is committed to the responsible use of resources and energy efficiency. The leadership realizes that the environmental protection laws are of great importance and use the environmental scanning to move in the right direction to obtain future success in the company. In 2006 alone the company has improved the energy efficiency in the United States operations by five percent and saving approximately $25 million with enough energy saved to equal 220,000 homes. The effective energy management protects the environment and reduces the greenhouse emissions. Some of the actions taken by the company include replacing lighting fixtures that use 40 percent less energy and using different low-energy, long-lasting compact fluorescent lamps in the properties to include the plants, corporate offices, distribution centers, and research and development campuses. Due to the environmental scanning that takes place at Ford Motor Company the company will use the information that is collected and continue in this direction. New projects for the company include Fumes-to-Fuel that is a system that converts paint fumes into electricity that is being performed with Detroit Edison along with attempting to consolidate the application of primer, base and clearcoat paint applications into a single application to eliminate the need for separate applications and ovens. In addition to the paint booth emissions Ford Motor Company will continue to rely on alternative energy sources such as landfill gas and wind and solar technologies to power their manufacturing facilities.

Ford Motor Company – Technology –

Another environmental scanning tool that Ford Motor Company monitors and uses would be the technological portion. The company has invested $1 billion in the latest technology for flexible manufacturing. The technology that is involved is in many forms to include wireless technology that is installed on the delivery trucks with supplies to the plant as a monitoring status and improved efficiency to reduce inventory. The flexibility of products in the same plant allows the organization to use the same machinery and process for all areas from body assembly, paint facility, and final assembly. The improved efficiency at the manufacturing facility allows for several vehicle platforms to be built on the same line to produce multiple models and quickly change the vehicle mix, the volume, and options based on customer demand.

The technological changes that are being embraced by Ford Motor Company through environmental scanning enables the company to experience huge cost savings through new product launches and 50 percent reductions in cycle changeovers along with waste reduction. Robots are among the technological changes that are being experienced within the organization to include the 400 from the project that are used to weld and assemble the metal body of the vehicle for stamping and assembly. Artificial intelligence in the form of advanced visions systems and laser tracking systems are used to ensure quality through accuracy and dimension abilities. A multi-million dollar training facility is used to ensure that the workforce has the knowledge, skills, and ability to reap the benefits from the new technology that is being used by the company. The training that is administered includes the new servo-electric weld gun system that identifies the perfect center for welding that has replaced the older and loud air-powered system that used a less sophisticated spring system. The environmental scanning of technology that is performed by Ford Motor Company has allowed the company to have positive outcomes in efficiency while remaining a competitive company in the industry through cost savings and continuous improvement.

Compass Bank- Political –

On February 16, 2007, Compass Bancshares, Inc., the parent company of Compass Bank, announced the signing of a definitive agreement under which Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBV Madrid: BBVA) (“BBVA”) will acquire Compass for a combination of cash and stock. Compass will become a wholly owned U.S. subsidiary of BBVA and will continue to operate under the Compass name. The transaction is expected to close during the second half of 2007, pending customary closing conditions, including necessary bank regulatory approvals in the U.S. and Spain and the approval of the stockholders of both Compass and BBVA.

BBVA, which operates in 35 countries, is based in Spain and has substantial banking interests in the Americas. The transaction will facilitate BBVA’s continued growth in Texas and will create the largest regional bank across the Sunbelt. Upon completion of the transaction, Compass will rank among the top 25 banks in the United States with approximately $47 billion in total assets, $32 billion in total loans and $33 billion in total deposits. In addition, the combined company will rank fourth in deposit market share in Texas with $19.6 billion in total deposits and 326 full-service banking offices.

Compass is a $34 billion Southwestern financial holding company that operates 415 full-service banking centers in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. Compass provides a broad array of products and services through three primary lines of business – Corporate Banking, Retail Banking and Wealth Management. Compass is among the top 30 U.S. bank holding companies by asset size and ranks among the top earners of its size based on return on equity.

Under the terms of the definitive agreement, which has been approved by the board of directors of Compass and the relevant bodies of BBVA, Compass will become a wholly owned subsidiary of BBVA. After closing, BBVA intends to merge its U.S. based banking affiliates – including the former operations of Texas Regional Bancshares, State National Bancshares and Laredo National Bancshares – with Compass.

The aggregate consideration is composed of a fixed number of approximately 196 million shares of BBVA common stock and approximately $4.6 billion in cash. The merger is subject to customary closing conditions, including necessary bank regulatory approvals in the U.S. and Spain and the approval of the stockholders of both Compass and BBVA. The transaction is expected to close in the second half of 2007.

The merger between both companies will be determined by the political factors ranging from implications of laws and regulations to the state of world politics including the consideration of wars which may be going on in different parts of the world. New laws, regulations, tax programs and public policy create forces and trends, which may provide challenges and barriers or opportunities for any company or organization.

Compass Bank – Technology –

Ford is in the process of implementing a laser marking system on its production line to ensure the highest standard on each transmission assembled. The system will be checking for quality on different points on the assembly line. Ford is teaming up with a company called MECCO to implement this process and a trial run of the new system will last for 3 months. MECCO is a leader in its industry when it comes to laser technology. The decision to implement this new laser marking system came because it is more cost- effective and safer than previous ways of marking checkpoints for quality.

Although this process at Ford has not officially been implemented yet, Compass Bank can learn a few different things. It may be a good idea for Compass Bank to do a short trial of online cell phone banking to see how popular it becomes and if it worth all the time and effort, being spent to get it launched. Compass Bank should also consider investing into a company who is the best at what they do, is in the same time zone, and can meet their demands in a timely manner, not simply because they may be cheaper. Finally, Compass Bank can learn that they need to consider what will be most cost-effective and in the best interest of the company over time. Organizing a time line and a list of costs and potential risks would also be beneficial to Compass Bank so they know what to expect and when with the implementation of online cell phone banking.

When completing the global scan one looks for emerging new technologies which may impact any business in any industry. At one time the emergence of the Internet was a technology that was becoming an emerging trend across all industries. Today very new technologies are used to develop information systems at a fraction of the cost and time of processes that were used five years ago. Wireless is a telecommunications technology that may have moved from a trend to a force in revolutionizing the way information is stored, accessed and used across all industries around the world. Some, if leveraged by a company within an industry before competitors use it, may even provide a competitive advantage.

Compass Bank – Competition –

Although mergers may be costly and rather difficult, the value it creates in the end is the desired outcome companies seek. The eagerness to merge is based on several beliefs, those beliefs are, that the performance gains are greater, expenses are reduced, market power is increased, and shareholder’s wealth is also greater than before. The value of a merger is enhanced when the overall benefit is more valuable than the aggregate of two separate pre-merger companies.

In the end, both John and Bernard should consider this before finalizing a decision. When Zion’s purchased Stockmans, there overall value increased by 43 branches. These branches will help performance and brings much more power to the financial market. In the Journal of Money article, Pilloff states “Companies are more willing to acquire others to avoid being acquired themselves.” Keeping this in mind, companies must figure out a cross border strategy.

As part of the broad environmental scan, it is important to identify the internal capabilities of the organization. There are various models for defining capabilities. Most focus on the broad set of intangible assets such as brand, human capital, organizational capital and even relationship capital. Others include the more concrete assets such as available capital, the organization structure, current technologies and information technology infrastructure. In addition to doing a broad environmental trend, Compass Bank needs to do a more detailed capability assessment using any of the models available.

DawningStreams – Competitors –

Business activities are becoming more and more complex to manage, because of distance, time zones, number of parties involved in projects, number of tasks to achieve, multiple prioritizations, lack of general synchronization, insufficient secure and confidential communication channels and growing complexity of IT infrastructures. The use of task list managers has become very common. It is becoming more difficult to keep teams synchronized, to follow and to implement new business processes and to exchange sensitive information confidentially. The DawningStreams software application is aiming at increasing the practicality of daily executive activities. The types of business, which will most probably be interested in our product, are construction (size of network), consulting (need for synchronization), pharmaceutical research (secure exchange of information) and the software industry (complexity of manufacturing).

Many companies have already developed software applications that enable secured communications and file sharing. However, most, if not all, are relying on Microsoft technologies, which prevent them from expanding to Mac or Unix users. DawningStreams is developed in Java, which can be used on any platform, including Mac and Unix. Microsoft has acquired the Groove Company and has released a new version of the product, which can perform many of the functionalities of DawningStreams, but not generic activities (http://office.microsoft.com/en-us/groove/default.aspx). This is our closest competitor by far. More recently, we found, merely by accident, a company called Shinkuro (www.shinkuro.com), which offers the file sharing aspects of DawningStreams but lacks other capacities.

Although DawningStreams will face competition from many existing players, the fact that it will combine a super-set of functionalities in one application, for a very reasonable price, will give it some leading edge over other competitors. If the US patent is granted, the position of DawningStreams will become a niche. Even if the patent were not granted, it would take a profound architectural redesign of Groove (or other competitors) to include generic activities and match the offer of DawningStreams. As a strategy we will monitor the activities of those companies’ websites and understand what they offer in terms of similar functionality and try to ensure we match or best those functionalities to the best of our ability and resources

DawningStreams – Political –

Maintaining the secrecy of information is the fundamental function of encryption items. Persons abroad may use such items to harm US law enforcement efforts, as well as US foreign policy and national security interests. The US Government has a critical interest in ensuring that persons opposed to the United States are not able to conceal hostile or criminal activities, and that the legitimate needs for protecting important and sensitive information of the public and private sectors are met. Since 2000, US encryption export policy has been directed by three fundamental practices: technical review of encryption products prior to sale, streamlined post-export reporting, and license reviews of proposed transactions involving strong encryption to certain foreign government end-users and countries of concern. US encryption policy also seeks to ensure that American companies are not disadvantaged by the European Union’s “license-free zone.” (Bureau of Industry and Security, 2007).

DawningStreams will contain cryptographic functions. Any reliable and efficient cryptographic system requires a central authority to avoid identity theft. Cryptography is a key functionality of DawningStreams. All specialists insist on designing systems using well-studied algorithms and fully tested protocols; novelty is considered a source of risk. The cryptographic layer of DawningStreams will rely on a dual public-private key system. The private key encryption system will implement Rijndael, the Advanced Encryption Standard (http://csrc.nist.gov/CryptoToolkit/aes/rijndael/), the public key system will implement RSA (www.rsa.com) and the hashing function will implement the 256 bits version of the Secure Hash Algorithm (http://secure-hash-algorithm-md5-sha-1.co.uk/ ).

Encryption products can be used to conceal the communications of terrorists, drug smugglers, and others intent on harming U.S. interests. Cryptographic products and software also have military and intelligence applications that, in the hands of hostile nations, could pose a threat to U.S. national security. The national security, foreign policy, and law enforcement interests of the United States are protected by encryption export controls. These controls are consistent with Executive Order (E.O.) 13026, which was issued on November 15, 1996, and the Presidential Memorandum of the same date. (Bureau of Industry and Security, 2007).

DawningStreams also plans to be an international company, as offices now exist in the Netherlands and the US. As part of the strategy, we will ensure we remain compliant by registering our product with any necessary agency and allowing those agencies access to the processes if they feel there is a threat. We will be responsible to monitor (as best as we can) our client base and to put the proper verbiage in our contracts that illegal activities will not be tolerated. We will continue to monitor the BIS site mentioned in previous paragraphs and also sites in the European Union such as the Crypto Law website of legal expert Bert-Jaap Koops (http://rechten.uvt.nl/koops/)

DawningStreams – Technology/Intellectual Property –

The management of organizational strategy requires a comprehensive assessment of the macro environment of the business. Intellectual Property (IP) refers to the original ideas and innovations evolved by an organization in order to haul up its systems and processes. Creation of ideas requires large investments. This necessitates the protection of IP. Benchmarking is the continuous process of measuring products, processes, and systems of an organization against those that are rated best in the industry. It helps in uncovering weaknesses and flaws in the organizational systems, processes, and products. (Watson, 2003)

The study of the global research conducted by McAfee Inc. and MessageLabs Ltd. on security threat in small businesses in the U.S. reveals that 80 percent of small-and-medium-sized businesses (SMB) believe that an information technology (IT) security failure would be damaging in attaining their business priorities. Yet, only few are courageously making steps to fight against infringements due to resource limitations from other business related priorities. The research implies that company size plays an essential part in the way senior management views security. Among the challenges that SMBs face include keeping up-to-date with security solutions and keeping costs low. Small-to-medium businesses’ behavior towards security is very tactical and meets only immediate requirements. (unknown, 2007)

DawningStreams’ relevance to these forces is two-fold. We are a software company—there is an opportunity for us to lose the intellectual property by those who would download and attempt to modify the code. We have competitors who offer functionality similar to ours, however we offer an additional functionality the others do not. It is this ‘specialty functionality’ for which we applied for a patent the United States Patent and Trademark Office. If the patent is granted, there is less likelihood of software piracy or the loss of our IP. Environmental scans should show us if there are other companies trying to do this.

The functionality, which most resembles our competitors’, is the ability to share files. That brings in a different concern with intellectual property- the possibility someone else’s IP could be sent from one of our users to another, as this could seriously damage our reputation, as what happened with Napster. (www.napster.com).

Conclusion

At one company after another–from Sears to IBM to Hewlett-Packard to Searle, strategy is again a major focus in the quest for higher revenues and profits. With help from a new generation of business strategists, companies are pursuing novel ways to hatch new products, expand existing businesses, and create the markets of tomorrow. Some companies are even recreating full-fledged strategic-planning groups. United Parcel Service expects to spin out a new strategy group from its marketing department, where strategic plans are now hatched. Explains Chairman Kent C. Nelson: “Because we’re making bigger bets on investments in technology, we can’t afford to spend a whole lot of money in one direction and then find out five years later it was the wrong direction.”

In such a world we need a planning model that allows us to anticipate the future and to use this anticipation in conjunction with an analysis of our organization–its culture, mission, strengths and weaknesses–to define strategic issues, to chart our direction by developing strategic vision and plans, to define how we will implement these plans and to specify how we will evaluate how well we are implementing these plans. The fact that the world is changing as we move forward in the future demands that the process be an iterative one.

References

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Investor Relations. Retrieved from the Internet on March 31, 2007 at

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Cole, Jim. Zions makes small deal, cites growing Arizona market. American Banker, 171(175), 1-1. Retrieved March 31, 2007 from Proquest Database.

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from the World Wide Web, Web Site: [https://ford.com]

Ford, S. (2004) Adapted from 13 Skills Managers Need to Succeed, Harvard Business School

Press. Retrieved March 31, 2007 from EBSCOHost Database.

Hockenberry, Todd. (2006). Ford implements advanced laser marking. Industrial Laser Solutions, 21(4), 6-7. Retrieved March 31, 2007, from EBSCOhost database

Jacobs, P. (2005) Five Steps to Thriving in times of Uncertainty. Negotiation (p.3) Retrieved

April 1, 2007 from EBSCOHost Database.

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54. Retrieved March 30, 2007 from EBSCOHost Database.

Pearce, J. & Robinson, R, (2004). Strategic Management: Formulation, Implementation, and Control. [University of Phoenix Custom Edition e-text]. The McGraw-Hill Companies. Retrieved March 2007, from the University of Phoenix, Resource, MBA 580-Strategies for Competitive Advantage Course Web Site: https://ecampus.phoenix.edu/secure/resource/resource.asp

Author Unknown, Strategic Planning, After a decade of gritty downsizing, Big Thinkers are back in corporate vogue. (2006) Retrieved from the Internet at http://www.businessweek.com/1996/35/b34901.htm

Unknown (2007) 80% of Small-to-Medium Sized Firms Fear a Security Threat. Computer Security Update 8 (4). Retrieved March 30, 2007 from EBSCOHost Database.

Unknown (2006) Strategic Planning, After a decade of gritty downsizing, Big Thinkers are back

in corporate vogue. Retrieved from the Internet at

http://www.businessweek.com/1996/35/b34901.htm

US Department of Commerce (2007), Encryption (ch.10, section 742.15). Retrieved March 27, 2007 from the Bureau of Industry and Security Website at http://www.bis.doc.gov/news/2007/foreignpolicyreport/fprchap10_encryption.html

Watson, G. (2003) Business Environmental Scans for Intellectual Property Strategy (PowerPoint Presentation). Retrieved March 28, 2007 from the Oklahoma State University website at http://www.okstate.edu/ceat/msetm/courses/etm5111/CourseMaterials/ETM5111Session3Part2.ppt#260,1,Business Environmental Scans for Intellectual Property Strategy

Mergers & Acquisitions Can Result from Strategic Alliances

Alliances frequently result in mergers and/or acquisitions. Partnering relationships, such as joint ventures or strategic alliances, can sometimes lead to a merger or acquisition situation. After companies work together for a period of time and get to know one another’s strengths, weaknesses, and synergistic possibilities, new relationship opportunities become apparent. One could argue that a joint venture or strategic alliance is simply the getting to know each other part of a courtship between companies and that the real marriage does not occur until the relationship has been consummated by a merger or acquisition.

To make the point, Dan McQueen, president, at Fluid Components International (FCI) built a Partnering relationship with Vortab, a small technology company. Vortab produced static mixers, a technology suitable for flow conditioning that complemented FCI’s product offering. While Vortab also had three other distribution partners in addition to FCI, FCI’s volume with Vortab continued to grow to the point that Vortab’s technology became an important part of FCI’s total sales volume. After about three years into the relationship, FCI acquired Vortab.

Because of the close relationship between Vortab and FCI, when the Vortab was put up for sale McQueen knew its true value. Resulting from his knowledge, FCI was able to purchase Vortab at a much more realistic price than Vortab’s asking price. The Vortab technology integrated well with FCI’s core competency technology and today FCI also distributes Vortab through some of its non-direct competitors.

The following list demonstrates some of the specific values created or developed from the various organizational blending methods:

· Operational resource sharing

· Functional skill transfer

· Management skill transfer

· Leverage (economies of scale)

· Capability increases

Mergers

Mergers occur when two or more organizations come together to blend or link their strengths. Also in the deal is a blending of their weaknesses. The hopeful result is a new more powerful organization that can better produce goods and services, access markets, and deliver the highest quality customer service. Mergers offer promise for synergistic possibilities. This is achieved by the blending of cultures and retaining the core strengths of each. In this scenario, a new and different organization generally emerges. The goal is a sharing of power, but usually the strongest rise to the top leadership.

Exxon – Mobil

The Federal Trade Commission gave Exxon and Mobil the green light On November 30, 1999 for their $80 billion merger. The next day the transaction was completed. The merged organization officially became Exxon Mobil Corp. The merger actually brings “the companies back to their roots when they were part of John Rockefeller’s Standard Oil empire. That company was the largest oil firm in the world before it was busted up by the government in 1911.”

At the 1998 announcement of their intention to merge, Mobil chairman, Lucio Noto made a comment about the need to merge. He said, “Today’s announcement combination does not mean rhat we could not survive on our own. This is not a combination based on desperation, it’s one based on opportunity. But we need to face some facts. The world has changed. The easy things are behind us. The easy oil, the easy cost savings, they’re done. Both organizations have pursued internal efficiencies to the extent that they could.”

While part of the deal was the selling of a Northern California refinery and almost 2,500 gas station locations, the divestiture represents only a fraction of their combined $138 billion in assets. Lee Raymond, Exxon chairman, now chairman and chief executive of the merged company said, “The merger will allow Exxon Mobil to compete more effectively with recently combined multinational oil companies and the large state-owned oil companies that are rapidly expanding outside their home areas.”

Exxon Mobil is now like a small oil-rich nation. They have almost 21 billion barrels of oil and gas reserves on hand, enough to satisfy the world’s entire energy needs for more than a year. Yet, there is still the opportunity to cut costs. The companies expect their merger’s economies of scale to cut about $2.8 billion in costs in the near term. They also plan to cut about 9,000 jobs out of the 123,000 worldwide.

AOL – Time Warner

On January 10, 2000, Steve Case, chairman and chief executive of America Online (AOL), sent an e-letter to his 20 million members. He said, “Less than two weeks ago, people all over the world came together in a global celebration of the new century, and the new millennium. As I said in my first Community Update of the 21st Century, all of us at AOL are extremely excited by the challenges and prospects of this new era, a time we think of as the Internet Century.

I believe we have only just begun to see clearly how the interactive medium will transform our economy, our society, and our lives. And we are determined to lead the way at AOL, as we have for 15 years–by bringing more people into the world of interactive services, and making the online experience an even more valuable part of our members’ lives.

That is why I am so pleased to tell you about an exciting major development at AOL. Today, America Online and Time Warner agreed to join forces, creating the world’s first media and communications company for the Internet Century. The new company, to be created by the end of this year, will be called AOL Time Warner, and we believe that it will quite literally change the landscape of media and communications in the new millennium.”

The next day newspaper headlines read, “America Online, Time Warner Propose $163-Billion Merger.” The Los Angeles Times said, “In an audacious deal bringing together traditional entertainment and the new world of the Internet, America Online and Time Warner Inc. on Monday announced they will merge in the largest business transaction in history.”

The story later revealed the value comparisons of the companies. While AOL earns less than Time Warner, the stock market thinks AOL’s shares are worth more. “America Online is valued by the stock market at nearly twice Time Warner–$173 billion, compared with $101 billion as of Friday’s [1/7/00] market close–even though it has one-third Time Warner’s annual revenues.” The article also stated “AOL earned $762 million on $4.8 billion in sales in the year ended Sept. 30 [1999].”

AOL chairman, Case wants to move fast. The Times article stated, “Case said the two chairman began discussing a combination this fall [1999], he has tried to impress upon Levin [Gerald Levin, chairman at Time Warner] the need to operate the new company at Internet speeds.” (We all know the rest of the story…nothing is forever.)

The prophets of gloom are always ready to point out the down side to deals. In UPSIDE magazine, Loren Fox reported some of the challenges to the marriage. They are:

· “The holy grail of strategic synergy has been elusive in the media world.”

· “In the offline world, it’s notable that Time and Warner Brothers have continued to run fairly independently despite a decade as Time Warner.”

· “‘From any standpoint, this has not been a success to date,’ says Yahoo President and COO Jeff Mallett.”

· “When you buy the company, you get things you don’t need.”

· “Warner might make these deals easier, but it might also bring new risks–even for AOL, a veteran of 25 acquisitions over the last six years. Employees might flee to pure dot-com companies, ego clashes could stymie plans or financial gains may never cover the large premium paid for Time Warner.”

· “You don’t need to own everything to do what AOL and Time Warner are doing.”

Warner-Lambert

Merger mania can make strange bedfellows, let alone promises unfulfilled. Alliances can lead to mergers. Warner-Lambert is an example of all the above. This is corporate soap opera at its best.

· June 16, 1999, Warner-Lambert Company announced that it has signed a letter of intent with Pfizer Inc. to continue and expand its highly successful co-promotion of the cholesterol-lowering agent Lipitor (atorvastatin calcium). The companies, which began co-promoting Lipitor in 1997, will continue their collaboration for a total of ten years. Further, with a goal of expanding their product collaborations, the companies plan to explore potential Lipitor line extensions and product combinations and other areas of mutual interest.

· November 4, 1999, newspapers across America report on “one of the biggest mergers of any kind, ever.” The Wall Street Journal said, “Now, American Home is set to merge with Warner-Lambert Co. in a stock deal that is valued at about $72 billion. It stands as the biggest deal in drug-industry history and one of on the biggest mergers of any kind, ever.” Also reported, “Warner-Lambert held talks with Pfizer Inc. at the same time it was negotiating with American Home.”

· November 4, 1999, The New York Times runs a story titled, “Can a Strong-Willed Chief Share Power in a Merger?” The article lead with, “The planned merger between American Home Products and Warner-Lambert once again raises the question of whether John R. Stafford, American Home’s famously strong-willed chairman and chief executive, is capable of sharing and, perhaps more important, letting go of power.”

· January 13, 2000, Warner-Lambert Company indicated that, as a result of changing events, it is exploring strategic alternatives, including meeting with Pfizer, following Pfizer’s recent approach. In that regard, Warner-Lambert said that its Board of Directors has authorized management to enter into discussions with Pfizer to explore a potential business combination. The Company stated that, in light of changing circumstances, its Board had concluded that there is a reasonable likelihood that Pfizer’s previously announced conditional proposal could lead to a transaction, reasonably capable of being completed, that is better financially for Warner-Lambert shareholders than the proposed merger with American Home Products.

Lodewijk J.R. de Vink, chairman, president and chief executive officer of Warner-Lambert, stated, “It has always been the Board’s objective to secure the best possible transaction for Warner-Lambert shareholders and we will now pursue discussions with Pfizer to determine if a combination with them to achieve that goal is possible.” The Company emphasized that there can be no assurance that any agreement on a transaction with Pfizer, or that any other transaction, will eventuate.

· January 24, 2000, in response to inquiries, Warner-Lambert Company said that it would continue to explore strategic alternatives, including discussions with Pfizer. The Company’s unwavering goal is to provide the greatest value to Warner-Lambert shareholders. Warner-Lambert officials emphasized that there can be no assurance that any transaction will be completed and offered no further comment.

Was American Home Products the bride left at the altar? The Wall Street Journal didn’t think so, in fact they called American Home the Runaway Bride in their November article. Additionally they listed several companies that American Home has them selves left at the altar.

· Early November 1997, American Home Products and SmithKline Beecham begin merger talks.

· January 30, 1999, Talks break off.

· June 1, 1998, American Home and Monsanto announce agreement to merge.

· October 13, 1998, American Home and Monsanto cancel plans to merge.

· November 3, 1999, American Home and Warner-Lambert Co. in talks to merge.

Acquisitions

An acquisition is basically the function of one company consuming and digesting another. The result is that the acquiring company shores up core weaknesses or adds a new capability without giving up control, as might occur in a merger. Added capabilities, rather than synergy is usually the reasoning behind acquisitions. In this situation, the acquiring company’s culture prevails. Frequently one company will acquire another for their intellectual property, their employees or to increase market share. There are numerous strategies and reasons why one company acquires another, as you will soon discover.

Guardian Protection Services has been acquiring alarm companies within its northeast region of operation to supplement its internal growth. Russ Cersosimo, president says, “This is just another way for us to satisfy our appetite for growth. Our desire is to expand our opportunities in the other offices. That is another reason why it is attractive for us to look to acquire companies, to get their commercial base and commercial sales force that is in place in those offices. We wanted to make sure that we can digest the new accounts without putting strain on our paper flow and the systems we have in place.”

Who does R&D acquisitions well? Electronics Business recently answered, “Cisco Systems Inc., San Jose, the networking equipment company, which boasts many success stories among its 40 acquisitions of the past six years.” None of their acquisitions were in mature markets, rather all were leading edge, allowing Cisco to broaden its product offering. Cisco hedges its acquisition bets through volume. Ammar Hanafi, director of the business development group at Cisco says it counts on two out of three acquisitions succeeding and the remaining third doing just okay. Acquiring people, intellectual properties and specialized skills is important to companies like Cisco. They think that even if the acquired technology does not pan out, they have the engineers. Generally, any fast growing company like Cisco cannot hire people fast enough and the acquired personnel are a boon to the company’s progress. Retention of acquired employees is at the heart of their acquisition strategy. “If we’re going to lose the people who are important to the success of the target company, we’re probably not going to have an interest,” says Cisco controller Dennis Powell.

“Cisco doesn’t do big acquisitions, the cultural issues are too huge,” Hanafi says. Cisco buys early stage companies with little or no revenues. While they often have paid extremely high prices for the acquisition, they seem to do better than most with their selection. Between 1993 and 1996, Cisco bought cutting edge LAN switching technologies for a total of $666 million in stock. More than half was spent on Grand Junction Networks Inc., which developed fast Ethernet switchers. At the time of purchase, it is estimated that Grand Junction’s annual revenues were $30 million. “Today, the four LAN switching acquisitions account for $5 billion of Cisco’s $12 billion in annual revenues.” “We acquire companies because we believe they will be successful. If we didn’t believe in their success, we would not acquire them,” says Powell.

Little known West Coast Texas Pacific Group (TPG) has been acquiring at a feverish pace. Their semiconductor and telecom buying spree includes, GT Com in 1995, AT&T Paradyne (from Lucent Technologies Inc.) in 1996, Zilog Inc. in 1997, Landis & Gyr Communications SA in 1998, ON Semiconductor (from Motorola Inc.), Zhone Technologies Inc., MVX.COM and Advanced TelCom Group Inc. in 1999.

TPG banks heavily on intellectual capital. Many believe that by being part of TPG, their single biggest advantage is access to broad pool of talented and well-connected people. CEOs can take advantage of TPG’s contacts in other industries around the world. “TPG has this ability to build a virtual advisory board…that they don’t even have to pay for,” says Armando Geday, president and CEO of GlobeSpan Inc.

Lucent Technologies, Inc. has also been rampaging through the same market as Cisco. Lucent’s 1999 (January to August) acquisitions as listed in CFO magazine include:

· Kenan Systems for $1 billion

· Ascend Communications for $24 billion

· Sybarus for $37 million

· Enable Semiconductor for $50 million

· Mosaix for $145 million

· Zetax Tecnologia, $ N/A

· Batik Equipamentos, $ N/A

· Nexabit Networks for $900 million

· CCOM, Edisin, $ N/A

· SpecTran for $99 million

· International Network Services for $3.7 billion.

An advantage that Lucent has over its competitors is access to its 25,000-employee Bell Labs idea factory. As such, they are more likely to purchase technology rather than R&D. Still, Lucent continually reviews the comparative advantages of technology and R&D in relationship to its own projects in reviewing acquisition possibilities. Lucent executive vice president and CFO Donald Peterson says, “In every space in which we have acquired, we have had simultaneous research projects inside. It makes us knowledgeable, and lets us have a build-versus-buy option.”

Lucent wants their units as a hole to do well and if acquisition helps that cause, they acquire. Peterson also says, “We view acquisition as a tool among many that our business units can use to advance their business plans. We evaluate acquisitions one by one, in the context of the business strategy of the unit.”

Tyco International Ltd. is a diversified global manufacturer and supplier of industrial products and systems with leadership positions in each of its four business segments: Disposable and Specialty Products, Fire and Security Services, Flow Control, and Electrical and Electronic Components. Through its corporate strategies of high-value production, decentralized operations, growth through synergistic and strategic acquisitions, and expansion through product/market globalization, Tyco has evolved. From Tyco’s beginnings in 1960 as a privately held research laboratory, it has transformed into today’s multinational industrial corporation that is listed on the New York Stock Exchange. The Company operates in more than 80 countries around the world and had fiscal 1999 revenues in excess of $22 billion.

In the mid-1980s, Tyco returned its focus to sharply accelerating growth. During this period, it reorganized its subsidiaries into the current business segments listed above. The Company’s name was changed from Tyco Laboratories, Inc. to Tyco International Ltd. in 1993, to reflect Tyco’s global operations more accurately. Furthermore, it became, and remains, Tyco’s policy to focus on adding high-quality, cost-competitive, low-tech industrial/commercial products to its product lines that can be marketed globally.

In addition, the Company adopted synergistic and strategic acquisition guidelines that established three base-line standards for potential acquisitions, including:

1. A company to be acquired must be in a business related to one of Tyco’s four business segments.

2. A company to be acquired must be able to expand the product line and/or improve product distribution in at least one of Tyco’s business segments.

3. A company to be acquired that will introduce a new product or product line must be using a manufacturing and/or processing technology already familiar to one of Tyco’s business segments.

Tyco also developed a highly disciplined approach to acquisitions based on three key criteria that the Company continues to use today to gauge potential acquisitions:

1. Post-acquisition results will have an immediate positive impact on earnings;

2. Opportunities to enhance operating profits must be substantial;

3. All acquisitions must be non-dilutive to shareholders.

FASB Accounting Rule Change

The rules of the game are changing. Some of the accounting benefits of acquisition will soon disappear. Spending some extra time with your accounting and legal departments could prove beneficial in the long-term.

George Donnelly, in his article in CFO magazine writes, “The current state of accounting rules is clearly a factor in the frenetic acquisition activity at Cisco Systems and Lucent Technologies Inc. Like many high-tech companies, the two giants can acquire with little drag on their finances, because pooling-of-interest accounting enables them to avoid onerous goodwill charges that otherwise would ravage earnings.

But because of the death sentence the Financial Accounting Standards Board has levied on pooling, companies must use straight-purchase accounting after January 1, 2001. Then buyers will have to amortize goodwill for no more than 20 years.”

Consolidations and Rollups

Bill Wade in Industrial Distribution said: “The basic premise couldn’t be any simpler. Take a highly fragmented industry–like distribution–facing technological change, customer upheaval or chronic financing difficulties. Add in a few well-healed foreign firms or, worse, a couple of previously unknown competitors from outside the business. Since the industry leaders are probably family-run businesses with limited succession strategies, the next step to protect profit and continue growth is clear: consolidate.”

A consolidation or rollup, as it’s frequently called, generally occurs when an organization or individual with deep pockets sets out to buy several small companies in a fragmented industry and rein them in under a new or collective pennant. In 1997 the National Association of Wholesale-Distributors reported that 42 of the 54 industries they studied had been significantly affected by consolidation. Frequently a professional management and buying strength create economies of scale that allows the consolidator to pluck the low hanging fruit in the industry. They will invest significantly in systems to eliminate the duplication of effort and inefficiencies that exist within the industry being consolidated.

While some call it smoke and mirrors, many consolidators are yielding outstanding results. In 1997, at 39 years old, financial whiz Jonathan Ledecky pulled off a bold deal. As reported in CFO magazine, He went to the public equity markets and raised half a billion dollars for his company, Consolidation Capital Corp., in a brazen initial public offering. Without revenues, assets, operating history or identity (name or industry), he raised the capital in a blind pool on the strength of his reputation alone.

U.S. Office Products (USOP) is the result of 220 acquisitions. Sharp Pencil was one of six privately owned office-supply companies that Ledecky put together. But he didn’t stop, after two years, and 220 acquisitions later, USOP was a member of the Fortune 500, with $3.8 in revenues. “It was crazy,” says Donald Platt, senior vice president and CFO at USOP. Platt did rely highly on outside resources, including a team of lawyers and accountants to get the job done (the 220 acquisitions). “We restricted then to well-managed, profitable companies. At worst, we would still be making money,” says Platt.

H. Wayne Huizenga is the owner of the Florida Marlins baseball team. He is also the king of consolidators. He pioneered his technique by rolling-up trash-truck businesses to create Waste Management Inc., the nation’s largest waste company. He went on to create the largest video chain, Blockbuster Video. With AutoNation, Huizenga, now struggling, is attacking the retail automobile industry. In mid-December 1999 AutoNation had 409 retail franchises but announced the closing of 23 of their used-car superstores.

Michael Riley learned about consolidations while serving as personal attorney for Huizenga. In July 1999, Riley’s company, Atlas Recreational Holdings Inc., paid $14 million to purchase controlling interest in the only publicly traded RV dealership chain in the United States, Holiday RV Superstores Inc., in Orlando, Florida. Riley’s avowed intention is to grow the company from $74 in annual sales in 1998 to $1 billion by 2003 by acquiring other dealerships.

Riley says, “Consolidations really will help. We can bring advantages to sales and service. We can make a difference in warranty. There is a real value added when you put these companies together.”

Same Industry, Different Strategies

In mid-1997, roll-ups, United Rentals and NationsRent were formed. They are in a race, but are using different strategies to achieve their results. After two years of ravenously gobbling up companies, United had 482 locations while NationsRent had accumulated only 138 stores. NationsRent has been developing a nationwide identity with stores that look-alike and have the same signage and layout. United Rentals presence is virtually unknown since the stores retain their previous appearance.

Motivations for Consolidators

There are several good reasons why consolidators attack a particular industry. The following list provides some of the rational that assist them in their decision making process. As you look to profit from the trend, keep these elements in mind as you make your selection on whom to acquire.

· Confidence by the players that they can capture significant and highly profitable additional market share by implementing the cutting edge management, procurement, distribution and service practices that will give them a competitive edge over smaller players.

· Gain national customers through increased capabilities in delivering the highest levels of standardized service and national geographical coverage.

· Larger customers of independent distribution channels are seeking broader geographic coverage and networks of locations that allow for greater service capabilities, and the smaller customers want a high level of customer service and response.

· Customers’ desire for more product sophistication.

· Insurance and financing synergies.

Fragmented Industries Are Ripe for Consolidations and Rollups

Some industries that are ready for consolidations or rollup examples include heavy-duty truck repair, office products, recreational vehicle dealerships, rental stores (equipment, tools and party) and distribution. Consolidation does not just happen. It is triggered by shifts in supplier and customer expectations. Consolidation in a supplier base or customer pool often alters the economic rational for the structure of an industry. Functional shifts are accompanied by serious margin shifts among channel participants.

Take notice of the speed in which an industry can experience consolidation. If you are a consolidator, pick the low hanging fruit before another beats you to it. If you are fighting consolidation, take notice of the state of your industry and make adjustments (like strategic alliances) to your business plan if your industry is highly fragmented.

· TruckPro, the $150 million sales creation of Haywood and Stephens Investments, was sold in May 1998 to AutoZone, the $3 billion distribution king of do-it-yourself auto parts.

· In June 1998, nine heavy-duty distribution companies with volumes of $6 to $37 million, simultaneously merged and raised $46 million from the public for their brand new $200 million company, TransCom USA.

· Brentwood Associates, a venture capital company, during Spring and Summer1998, created HAD Parts System, Inc. a $145 million operation, by acquiring three companies in the Southeast.

· In July 1998, Aurora Capital’s QDSP acquired majority interest in nine heavy-duty companies from FleetPride, a $200 million parts and service operation.

Stated in Truck Parts & Service, “Here the independent suffers a staggering disadvantage to roll-ups. Consolidators have access to large amounts of capital. The independent businessperson, however, must primarily finance his growth by earnings retains from current operations. New high efficiency service bays, significant and growing training expenses, data processing and communications technology all clamor for increased working capital. The large players’ acquisition cost advantage eventually will win him all the mega-fleet business and the vast majority of business from mid-sized fleets.

Supplementing his parts acquisition cost advantage, the consolidator will be able to lower many overhead costs through centralized management and volume discounts…Combined savings in parts acquisition cost and overhead reduction should easily exceed 4% of sales.”

Some of the indicators that an industry (any industry) is poised for consolidation are listed below. If you notice your industry has similar issues, it is just a matter of time. Plan now for what is coming. Where do you want to be when the train arrives?

· A high degree of fragmentation with numerous smaller companies and few, if any, dominating players.

· A large industry that is stable and growing.

· Multiple benefits for economies of scale.

· Synergies that can be achieved by consolidating companies.

· Infrequent use of advanced management information systems.

· Limited access to public capital markets and somewhat inefficient capital structures among companies.

· Lack of opportunities, historically, for owners to liquidate their businesses if they wish to leave the industry.

Reasons for Business Owners Selling to Consolidators

The reasons for a business owner to sell his or her business are as varied as there are people. Usually it is not one reason but several combined reasons that influence a seller’s decision. The following list provides you with the general areas that might drive a selling decision:

· First generation owner, without heirs, nearing retirement.

· Lack of capital to make necessary technological and capital improvements to compete, within an industry, and with new competitors.

· Flat growth rate in industry.

· Better profitability as part of a larger organization.

· Centralized buying.

Things You Don’t Know About China Shoe Industry

The Unfavorable Factors Now Facing Shoe Industry in China

More Cost for Labors

The Uprising in RMB

Raw Material Price Keeping Rising

Foreign Anti-dumping Charges

America Sub-prime Mortgage

The “Red Sea” Competition Within Shoe Manufacturers Themselves

Shoe Export Slows Down

Guangdong, a province in south China, exported 490 million pairs of shoes in January and February 2008, valued at USD 1.59 billion, decreasing 27.5% and 0.6% from one year before, citing customs statistics.

From September 2007, Guangdong’s export of shoes began to fall, 18.5% year on year in November of the year and 20.3% and 35.7% in January and February 2008. Besides, in the first two months, the number of shoes exporters in the delta decreased 1,855 year on year to 1,512, due to a rising renminbi, the US’ subprime mortgage crisis and a rise in China’s labor cost.

China has 40,000 shoe manufacturing plants with annual output of 6.5 billion pairs, accounting for 20 percent of the world’s total. However, 85 percent of them are middle and low-end products. Experts suggest that China’s shoe industry development should base itself on fashion culture and advanced management concepts, transforming the industrial strategy from simple manufacturing to brand promotion.Half of the country’s shoe output originates in south China’s Guangdong province, but most shoe factories there are small in scale and use simple manufacturing processes without much added value.

Four Manufacturer Bases of Footwear Industry in China

Guangdong Province

Many factories Close-downs is the must paid price for the industry transformation

Jingjiang City in Fujian Provice

Who will laugh at last? The “red sea” competition condition for the sports shoe in Olympic 2008 is getting more and more fierce.

Jiangsu Province

Brand cultivating and promotion is the core

Making technological innovations and taking the lead with technologies

In recent years, the footwear industry in Jinjiang has been paying attention to making more investment in technology improvement and encouraging innovations in terms of new technologies, new materials and new craftworks. Nevertheless, the footwear industry in Jinjiang just takes the lead in terms of manufacturing equipments but the level of technological innovation remains low, the research and development is still rather weak, there still lack high-end talents and relevant software and hardware, there is no sufficient production capacity of top-grade products, and it still lags far behind the international advanced level as far as studies on new products in terms of comforts and functions are concerned.

2008 Dongguan China Shoes – China Shoetec

This UFI approved event is widely supported by footwear industry. China Chamber of Commerce for I/E of Light Industrial Products and Art-Crafts(CCCLA), Hong Kong Footwear Association, Taiwan Footwear Manufacturers Association, Dongguan Leather & Footwear Association have confirmed to organize exhibiting pavilions in Spring 2008, and will bring in brand new exhibitors, allowing footwear manufacturers and traders enjoy the rewards that China Shoes âEUR¢ China Shoetec will bring. At the same time, overseas buyers express great interests to visit the exhibition and show gratitude to the organizers for providing suppliers with good quality sources. It is expected that the show will attract around 25,000 domestic and overseas buyers.

E-business Web Choice – Finding Authentic Shoe Suppliers in China

If you happen to be a buyer, looking for appropriate China Supplier partners. Would you like to get comprehensive information, such as company business registration condition, actual production, trade, R & D abilities and quality management system, of potential partners quickly? Do you hope that this information is from an impartial authoritative organization like SGS? If you are looking for such suppliers and need such important business information, please choose Made-in-China.com. It has already become a leading B2B portal especially in assisting global buyers and Chinese manufacturers to make contact and conduct international trade.

The influence of Beijing 2008 Olympic Games to science and technology content of sports shoes product. Nowadays the current of product with the same quality is more and more serious, who can keep ahead of technology and make out larruping and suitable product for customers, who will be favorite. Besides, sport shoes manufactures need improve professional capability, at the same time enclose with athletic sports requirement, via reduce cost to supply bargain gym shoes product for person.

Compared with burgeoning markets such as Vietnam and India, experts said China still has advantages in terms of cheap power and water supply, excellent infrastructure and an integrated industry.

What Have We Done To Our Industrial Base In The USA – Why Did We Do It?

During the 2016 election there was lots of talk about jobs, mostly lost jobs to crumbled industries. Sectors of our economy which were once strong and vibrant, but we traded them away to other nations is bad trade deals. Donald Trump is correct most of the major trade deals we’ve made haven’t been good for our economy in the long-term, sure they may have won us brownie points on the international stage and helped us out ‘client nation’ other former super powers and slowed down an emerging super power – but to what avail if we don’t have decent jobs for our own citizens?

You should see the destruction we’ve done in the mining sector for no real reason, today we have incredible mining technologies to prevent environmental damage, but good luck trying to get that going again. How can we compete with manufacturing when the entire supply chain from resources to the finished automobiles has been trashed? We are so much better than this.

We’ve allowed our industrial capabilities to be crushed, and we have politicians pandering to the vocal minority and incited media rather than by reason and reality. It should not cost $50 million dollars in EIR work and lawyers to get a refinery approved or a new strategy to add clean-coal technology to an existing coal-fired energy generation plant that has existed burning coal for power for 50-years. I thought we wanted clean and cheap energy?

No, apparently we want to hijack the fossil fuel industry to divert the wealth of the industry to new unproven alternative energy folks who are friends or relatives of Pelosi, Reid, or donated big bucks to the Obama Administration’s elections. And it isn’t just the Democrats joining the crony-capitalist feeding frenzy, because when the money flows in politics, people line up and throw their politics out, they just want to get rich, problem is we the taxpayers get screwed, and now we pay again in higher energy costs for the subsidies, and inefficiencies.

Our companies are less competitive with higher costs in energy for manufacturing, industry, mining, and thus it is even harder to compete on top of the four items I previously mentioned. Of course, I digress again. The point is bad policies, cronyism and attacks on our corporations from unions, class-action lawyers, over regulation, and foreign influences have us running at 1500 RPM when we redline at 5,000 RPM. Think on this, because it is fixable.

The Use of Laser Marking

A laser has long been the preferred tool for making precise, permanent aesthetic marks on objects. From the patterns on your kitchen set to the patterns on your stained glass windows, lasers leave traces everywhere. The reasons why people choose laser marking methods like doing it by hand or other forms of radiation are:

Speed. Laser works fast. By programming a design into a laser machine, that design can be reproduced in a matter of seconds. The same thing, by a human hand, would require a hundred times that duration.

Repeatability. Watermarks, logos, barcodes etc are all security information, and producing perfect replicas is of the utmost importance here. Laser replication is as error-free as it gets, with error levels too low for even the most sophisticated machines to detect. Also, repeatability is often desirable even when it is not of such paramount importance – for example, while printing designs on apparel or accessories in bulk.

Precision. A laser beam is no more than a few microns thick. A micron is a thousandth of a millimeter – yes, I have my calculations correct. Therefore, there is no better instrument than laser for making fine markings on areas where precision is absolutely necessary. This is why laser is used on things like glassware, medical implements, barcodes, backlit keyboards etc.

Till recently, however, laser instruments have been limited to 2-dimensional surfaces. Even this was not seen as too great as limitation, as the biggest advantage of laser was its speed, precision, repeatability and permanence. Now, the same precise performance has been diversified to include 3D items, of the most complex shapes and varied sizes. This is where 6-axis laser comes in. 6-axis laser technology combines several features:

o 3D scanning, for one
o Use of robots to move around the workpiece. This allows a more constant path and distance of the laser, where both the head and the material being worked on are moved around to generate optimal results.
o Marking lasers with vision system
o Software tools to allow image wrapping, even around complex and elaborate 3D shapes such as lanterns, vases, gems and so on

Consequently, 6-axis lasers have become highly popular in industries that require high-precision cutting, etching or marking on 3D surfaces. As most people know by now, markings these days are made by erasure as often as they are made by painting. Backlit keyboards, for example, work by having paint on the entire surface, but a few layers of paint removed to create the symbol on the key. The same holds true for car dashboards etc.

6-axis laser is also used in the aviation industry to remove paint from magnesium castings. Another important use of this sophisticated and sophisticated marking technology is to remove metal coating from the surface to produce beautiful and complex patterns. For cost-effective, efficient and aesthetic marking technology, there is no better choice than laser marking systems.