Case Analysis of Aura
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Executive SummaryDear manager, The recommendation that I make for Aura is to expand outside Europe, such as Brazil and India. Brazil will host the Soccer World Cup of 2014 and the Olympics of 2016. Those events would bring lots of infrastructure projects that require lighting. And Aura`s energy saving and low maintenance product could reduce cost for them and bring Aura competitive advantages to lock down the deals. It could bring Aura total value of 56 million in the next 10 years. Aura could start with marketing research in Brazil, and then contact with local government to get support. After that, looking for local manufacturers and starting to build subsidiaries. If necessary, Aura can build its own factory for production. This requires Aura to invest a few million to open subsidiaries and the initial cost of the deal. If build its own factory, Aura could financing money from banks and the profit from deals could pay for it. In India, the potential sales 2 million T8 per year, and selling at higher price than average. The differentiated product has less competition in India. Aura could start to find partners in India and help it to entry the Indian market. The product could be sourced from China that is cheap and fast delivery speed. Building subsidiaries requires capital investment, but it will not be too much. By expanding outside Europe, it could reduce the cash flow cycle for Aura, and help Aura to future expand in Asia and South America.External Assessment The lighting industry is consisted by luminaries, lamps and lighting control. The sales depends on installations, replacement and refurbishments and there is a negative effect on technology. The trend is moving to energy efficient that brings the LED to the front of the stage. The opportunity of market growth of LED. The growth demand of LED would help the company to boost more sales and take more market share by improve its LED technology. According to the experts, the LED technology would represent 30% of the market in 2015 and 80% by 2020. The two key success factors are the mature level of LED technology and cost structure of producing LED. The threat of European market of fluorescent lamps. The sales could not be continued because the lack of new installation. The market is stable and sales were mainly driven by the refurbishment of the installed base. The two key success factors are the higher profit margin per year on long-life product and the development of technology. The opportunity of independent distribution channels. By distributing independently, it could reduce the cost of wholesalers, lower the price and increase profit. Based on Malmros, lighting usually represents 20% of wholesaler`s revenue. If the company can get 10% from there, it will be a huge amount of revenue. The two key success factors are the efficiency of direct sales force and the relationship with old wholesalers. Internal AssessmentAura is a lighting company that provides energy saving solutions, light sources, luminaries, and lighting control. The customer is mainly in small scale and for regular replacement of light sources was expensive or too complicated in the Europe.Strength #1: long-life productThis is a sustainable distinctive competencies and is valuable and rare. Aura does not have competitors until 2002, and the competitors do not heavily invested in it. It brings the top industry position for Aura and people will think about it when they mention to long-life lighting. It is likely to be inimitable because it requires technology. It could help Aura to take more market share because of its profession. And the company has the structure and resources to take the advantage.
Strength #2: Cold call approach to reach customersThis is a distinctive competencies and is valuable and rare. Aura call the potential customers and ask them do they need service and teach them the new technology. It is likely to be imitable because there is no barrier. It could help Aura to take advantage of making the customer think them first. It has the structure to do it.Strength #3: sourced the product and components both in Europe and AsiaThis is a sustainable distinctive competencies and is valuable and rare. Two continents provides flexibility of deliver time and low cost for different situation. It is rare because it requires development of both companies and suppliers. It is likely to be inimitable because the quality from both locations has to be the same. It could help Aura to be more flexible on the market and it has the resources to do it.Financial Performance and Future Financial Capacity The whole group is doing well on the financial performance but the parent company is not really good. The liability for parent company is increasing and it is getting hard for asset to cover it. The group is less depending on leverage, but the parent company still does. The group is operating efficiently on its asset. The Inventory turnover and working capital turnover show that the sales for whole group is increasing. And both group and parent company are generating more revenue per dollar of asset. Moving to profit, the group as a whole is generating more profit, but the profit of parent company is decline. Aura is getting bigger and bigger, it definitely could pay back the investment from parent company in the future, and the parent company needs the money because it is not doing very well. Almost all the ratios show the parent company is having a hard time.Current Strategies and their Implementation Aura is having a board differentiation strategy, it has its long-life products with less energy consuming than competitors, and the solution is provided by portfolio with other brand`s product. It has some horizontal mergers to expand the business and some cooperative relationships such as partnership and strategic alliances. Aura does strategic outsourcing for its products and components to Asia and Europe that provides flexibility and low cost. The company restructured to traditional products globally cost competitive and launched cost reduction measures of CRM to reduce cost. It is in the business for many year and it has a loyal customer bases high quality and technic product. The people from new managing team are from different industry that could bring more knowledge and experience for Aura to expend the business, and all the members are trying to push the sales that brings the concern of covering the potential risk.