In today’s business environment, effective and competitive strategies are needed to adapt to different changing market dynamics. Amongst the conditions for a company to implement new strategies are the evolution of consumer behavior, technological changes and a number of other environmental factors in businesses. For example, technological developments were responsible for reducing production costs and manufacturing high quality and standard products. Compared with those companies that are slow to implement new production models and techniques, companies that adopt new and useful technology are bound to be competitive. Due to the aggressive nature of the competitors, it is necessary that companies continually find ways to attract and retain customers.
Sustained organizational growth depends on the use of various models and strategies that are aimed at generating revenues and profits for the long term. Such models may entail the utilization of a combination of several approaches so as to attain production at low costs so as to maximize the profitability of the company. The present paper analyses the case of DMD Compressors so as to provide a hybrid business model to help the firm attain sustained growth in a dynamic and modern environment. The recommended model in the present report entails a mix of strategic leadership, creating a vibrant research and development department, total quality management, strategic human resource management and an aggressive marketing strategy in providing air compressors that meet the current and future market expectations.
Key Issues and Current Situation
To recommend a suitable and a sustainable growth model it is necessary to understand the various issues that are involved in the current business.
Investment and Initiatives
DMD has made several initiatives to increase their productivity as well as for adapting to the various challenges in the market. Building an engineering department that has the capability of producing the required specifications for the compressors. The firm has also expanded its service department by developing the varieties of solutions provided to companies for industrial compressors. Other initiatives include expansion across the country by increasing its number of sales representatives. The company has further acquired several critical assets such as new plants, equipment, and facilities that have enabled it to capture large and middle-sized customers across the country. The company as of April 2013 had employed over 70 new workers as well as posting annual sales of nearly Ar$ 32 million (US$ 6.7 million). Making initiatives and investments is crucial for the firm to adapt to the various dynamics in the market environment. The increase in the number of employees is an indication of the growth of an enterprise.
Organization Structure and Model
DMD has used a combination of functions and structures that are composed of several sections or divisions headed by different individuals. Three teams that handled the firm’s processes and operations include productions and sales, services and management teams. The production and sales teams worked to maintain the inventories, produce according to the order, secure new sales territories and among other duties. The services team was responsible for following up the sales functions as well as supervising the works of other departments such as administration, logistics and production management functions. On the other hand, the management team serves to monitor the company’s key performance metrics as well as acting as an advisory committee to the enterprise. The organization structure made sure that the firm enjoyed successful years between 2003 and 2010 through the 2010 model however it can be observed that faced various consequences as a result of implementing the strategies. It can, therefore, be seen that despite the successes that have been made by the company slowed growth and operational inefficiencies are present in the DMD model. The necessity of an organizational structure is noted in the fact that it enables the proper management of the resources as well as formulating goals and vision that are necessary for the sustained growth and profitability of a business entity.
The 2011 crisis is an example of the firm’s dwindling fortunes as indicated by the slowed growth of the DMD compressor sales. The crisis was further made worse by the eroding local production costs. The competitors are importing cheap and finished parts that make them have a better competitive advantage. Failure to meet customers’ proposal as well the inability of the company to fill orders as placed by the clients are some other inadequacies that are associated with the current DMD business model. Even though the firm implemented several initiatives to counter the effects of the 2011 crisis it can be observed that the there was no improvement in the results as the company did not record any sustained growth. The business should, therefore, consider conducting an analysis of whether it is focusing on the right target market. The target market is essential to the success of the business because the firm has got the ability to utilize its resources effectively for the right purposes.
Adjusting the Current Model
The adjustment of the current model should be aimed at promoting sustained growth and profitability for the long-term success of the business. The changes are made to effect maximum revenue generation from the current product and service lines and to ensure the competitive ability of DMD in a dynamically changing compressor market. The changes made are done to reduce the ineffectiveness and inefficiencies that are currently slowing down the growth at DMD.
In the wake of cheap and finished imported compressor parts that are being used by the rivals, cost effectiveness remains an essential strategy towards profitability and sustained growth (Chesbrough, 2013). DMD should aim at to produce cheaply and goods of high quality and then make profits using the economy of scale by producing in large volumes. The material, labor, and overhead costs can be reduced significantly leading to cheaper products that are more competitive as compared to the rivals’ offering. The material costs can be controlled through modification of the manufacturing processes so that quality compressors can be produced with the application of alternative materials. The firm should consider the continuous analysis of the suppliers so as to determine the supplier from which the materials can be sourced cheaply and reliably while not compromising quality standards and integrity of the supplied materials as well as the resulting products.
Labor costs should also be cut significantly to achieve the desired low-cost compressors that are competitive in the market. While reducing labor costs may entail laying off some workers, it is necessary to adopt a workforce optimization strategy in which the business utilizes the existing personnel. Redundant roles and department should be terminated increasing staffing in key roles such as sales and production. The overhead costs can also be minimized through adopting manufacturing and production techniques that are efficient in energy consumption and that which is aimed at eliminating wastes. Cheaper energy sources should be incorporated into the production processes. Expenses on rent can be reduced by strategically acquiring land and facilities especially if the company is contemplating expansion of its operations. Outsourcing of facilities can also be seen as a key way through which the overhead costs can be reduced significantly.
Research and Development
Innovation remains a top pillar in achieving any sustained growth and for acquiring competitive growth (Chesbrough, 2013). Through innovation, DMD can remain competitive by producing goods and services that are distinct and more cost-effective as compared to the rivals’ offering. DMD needs to establish a vibrant research and development (R&D) team whose role is to ensure that the firm continuously learns and improve its processes and hence the goods and services that are made available to the clients. The R&D team should work closely with all the departments to ensure that the production process is enhanced. Using the results of the market research, the R&D department should design and develop products that align with the changing consumer tastes and preferences.
Given the constant changing dynamics in the business environment the, R&D team should respond to the market needs by providing products and solutions that are aimed at fitting into the current and future markets. Technological changes may make most types of the compressors to be obsolete in a short or long term as the customers may resort to cheaper and better alternative means of achieving the desired movements in the industrial applications. Innovations should also be made towards the achievement of the compressors that are not only effective but those that are cheaper and can be afforded by the target market segment. The R&D should also consider developing compressors of increased efficiencies and powers. At the same time, the section should be responsible for developing the compressors that serve different purposes apart from just converting the electric or gas power into the desired movement. Long term goals regarding the compressors may entail considering designing and developing the equipment for power generation entirely. Such innovation should involve considering the use of atmospheric air to produce air.
While the current leadership structure has considerably attempted to create success in DMD strategic goals, it can be observed that the lack of results and slowed growth (Ireland, Hitt, & Sirmon, 2003). One of the challenges facing DMD can also be seen to be embodied in the absence of suitable management skills sets especially during the transition after the death of the founder. Strategic leadership is part of a business model since it offers the direction, monitoring and the control of the choices that are made towards the achievement of the goals of the firm. Through a proper leadership, the company should expect to motivate and empower the employees to achieve more and to be more. The leadership should, therefore, design and implement effective training and development systems that are aimed at continuously equipping the members of the staff with the right skills and attitudes for the increased performance and productivity. The leadership should also monitor the various performance metrics that are set to measure the operations and the achievement of goals.
The leadership should define the vision and mission of the company while charting the path that is necessary to achieve the set goals and metrics. As such the strategic leadership should inspire and monitor sustained growth in the firm. The achievement of such leadership should entail training and developing the current leaders and managers to adopt visionary attitudes towards the strategic achievement of the organizational goals.
Total Quality Management (TQM)
Quality of products and services is an essential aspect of an organization strategic existence and sustained growth. Not only does TQM enables compliance with the set regulations and standards it enables the differentiation of the firm’s goods and services (Dale, 2015). DMD should consider improving their processes to allow manufacturing of compressors that are effective and efficient and reliably serve the intended purpose of the customers. Quality processes such as inspection, control and assurance should remain critical elements of TQM. The processes should enable elimination of defective and malfunctioning compressors so as to increase the client confidence and loyalty. As a business strategy TQM entails principles that every member of staff should be committed to the quality standards that are required of the firm. At DMD TQM should be incorporated into the business and growth model to enable long term success through customer satisfaction. The strategic decision to implement TQM should also be aimed at doing the right things at the right with an aim of elimination of wastes and defects through combination of various tools aimed at improving the essence of business operations. Some of the key principles that should be incorporated by DMD include empowerment of employees, continuous improvement, customer focus and fact based decision making.
Marketing and Sales Strategy
An aggressive marketing strategy for the firm’s products solutions should remain one of the primary goals at DMD (Cravens & Piercy, 2006). Increasing the market share in the compressor business industry should enable DMD to remain more competitive. Some strategies to be applied in increasing the market share should include increased and aggressive efforts at enhancing products and service visibility. Proper promotion and branding should therefore enable the company to reach more customers. Promotion should also help in raising the brand awareness. Potential clients should be informed of all the solutions and product categories that are offered by DMD. Part of the marketing strategy should product differentiation from the other similar goods and services in the same sector. The successful marketing should also be aimed at strategic assessment of the consumer behavior. Identifying the needs of the consumers is also a necessary part of developing sustainable relationship for long term profitability. The market strategy should be monitored for making necessary adjustments that are required to maintain the success of the business.
It should remain part of DMD’s goal and mission to actively and continuously establish new market territories. Apart from the local Argentine market, the business should consider global and emerging markets so as to increase the revenue generation through increased sales. The sales strategy should integrate effective pricing. Making the marketing strategy should also entail assessment of the strengths, weaknesses, threats and opportunities of the business. Flexibility in customer service, special features of the products and specialist knowledge should be essential part of the strategy. The opportunities that can be utilized to improve the marketing strategy include monitoring the increased market demands from various segments. The use of internet for marketing can also be observed as an appropriate mechanism for promoting the sales within the targeted markets. New technologies should be also deployed to improve the quality of the products and solutions that are offered by the company.
At the same time, it should be noted that there are threats that may affect the marketing strategies. The marketing model should consider the threats posed by the emergence of a new competitor. The emergence of more sophisticated, cheaper and better versions of the products services must also form part of the important consideration in the processes that are aimed at creating an effective business model. Various factors such as legislations that increase the costs of doing business as well as the economic downturns that decrease the demands of the products and services that are offered by the firm.
The dynamics of the business environment necessitate that business to constantly review and adjust its business model so as to adapt to the various the changes in the market. The present has analyzed the DMD Compressors case study to develop a hybrid business model to help the firm attain sustained growth in a dynamic and modern environment. The changes are made to effect maximum revenue generation from the current product and service lines and to ensure the competitive ability of DMD in a dynamically changing compressor market. The recommended model, therefore, entails a mix of strategic leadership, creating a vibrant research and development department, total quality management, strategic human resource management and an aggressive marketing strategy in providing air compressors that meet the current and future market expectations.
Chesbrough, H. (2013). Open business models: How to thrive in the new innovation landscape. Harvard Business Press.
Cravens, D. W., & Piercy, N. (2006). Strategic marketing (Vol. 7). New York: McGraw-Hill.
Dale, B. (2015). Total quality management. John Wiley & Sons, Ltd.
Ireland, R. D., Hitt, M. A., & Sirmon, D. G. (2003). A model of strategic entrepreneurship: The construct and its dimensions. Journal of management, 29(6), 963-989.