Alcaplan Limited

The report brings into perspective the risk and strategic enterprise management for the Alcaplast Company. Alcaplast is a family business in the Czech Republic, founded in 1988. Producing more than 500 products comprising of valves, traps, modules, grids, drains, toilet seats; Alcaplast is the largest manufacturer of sanitary ware in Central and Eastern Europe.

The critical analysis brought forth is of its internal and external environment that has been derived from the overall research of its general reports. In doing so, it brings about room for the formulation of the SWOT analysis which in the end results to the accurate recognition of the main strategic risks.

Thereafter the potential market entry options are discussed. It includes the location of which the Alcaplast Company can ensure will make out a favourable environment to which they will be able to get into the foreign market without much of a hitch. Risk assessment is later discussed in the methodology explaining the purpose of finding a suitable criterion in which it can be assessed, evaluating the impact and likelihood scale and other general concepts onto which risk assessment lies.

Mitigating of the identified risks is also discussed later using the selected market entry strategy.

The report is able to analyse the risk and strategic enterprise management techniques that will be required in the expansion of the Alcaplast Company across the Western Europe beginning with the United Kingdom (UK).

Risk and Strategic Enterprise Management

Introduction

The purpose of the report is to provide the Alcaplast company reliable expertise of how it will be able to expand itself to the Western Europe market. Since it expansion starts with the UK, the report focuses on the strategic risks that are likely to be faced. The risks are analysed to ensure that the company’s trail is well established. The report therefore bases on the actual study of Alcaplast Company, analysing and evaluating its information. The company’s current situation is derived from well researched sources, magazines published by the company and on online forums where the company has brought into sight information about themselves. The information is current and up to date since its purpose is to provide us with a clear knowledge on how the company is being managed and how it operates bringing about the accurate risk assessment.

Strategic risks that the Alcaplast company will face on its road to expand its markets are identified. Through the SWOT analysis we are able to categorize the company’s strength, weaknesses opportunities and threats that will be encountered. The risks will later be mitigated with the entry strategy that will be selected after the taking into account the prioritized risks.

Situation Analysis

In any company, risks are the potential threats that are faced. Threats are most likely to be associated with the losses than gains within the company. Strategic Enterprise Management (SEM) on the other hand refers to the management techniques, metrics and related tools that assists companies to make strategic decisions when it comes to its management. The same can also be said of SEM, that it’s a solution developed towards building an integrated system to manage diverse processes in an organization but with an aim unifying the system through the planning, executing and controlling processes.

Risk and Strategic Enterprise Management in a business environment is influenced by the risks and uncertainties that is faced by the company. The section therefore provides a basis in which to peer into Alcaplast’s internal and external environment bringing into light the company’s growth, its resources and capabilities and also its competitive landscape.

Alcaplast Company was founded in 1988 in the Czech Republic. It is then that they launched their first three products being the fill valves, flush valves and the wash-basin wasted and traps. A year later they begun purchasing areas in which they would be able to open production facilities and later on graduated to having an administrative building where all could be managed. With the company’s growing enterprise more land was being purchased and that meant that development was taking place. More products were later added and it boosted the company’s growth.

Alcaplast has well structures resources. It has at least 550 employees, distributed over its branches of Slovakia, Hungary, Poland, Belarus, Romania and Russia. Its distribution across central and Eastern Europe made Alcaplast the biggest manufacturer of sanitary systems. Alcaplast also has a production area of about 40,000 m2 (4 hactares) which has been made productive through the use of new technology, use of automated machines and robots during production. It ensures that the production and development of its products are done within a short time and that production is a success.

Alcaplast’s efficiency in production and management can be seen in its exports all across Central and Eastern Europe. That brings about its capabilities in providing a large market cover and ensuring that they have the facilities and resources to cater for their expanding markets. It becoming the largest company in manufacturing of sanitary systems brings about the fact that it has a high competitive landscape. Alcaplast has a capable team that ensures that the products produced are of quality and that they have been tested and proven to meet the standards that is required for their efficient working and use. They also bring to the market a full range of sanitary products and by doing so ensure that the end user has a variety of products to choose for and that their preferences have been catered for.

Alcaplast’s Growth

Since its establishment in 1998, the company run by husband and wife has been placing high emphasis on the innovation of the company. Alcaplast strives to create reliable premium products and education through continuous innovation which in the end will provide high utility values for its customers all around the world. The company’s history and stories are shared through websites and social media to the public. Alcaplast has expanded their services and they have 6 subsidiaries abroad and that enables them be able to export their products to more than 40 countries all across Eastern Europe. Since its beginning with the launch of only a few products, it has now a portfolio of over 580 products. The company works as a manufacturer and distributor of their own products and they get an upper hand in their management.

Alcaplast’s Market in the UK

Alcaplast’s intention to expand their market to the Western Europe beginning with the UK brings about both its capable industry and market evaluation. Alcaplast won ‘Czech 100 best companies’ award showing that the company is focused on achieving its mission of high product innovation and management. The management strategy put in place is that the founders of the Alca Company, the husband and wife own the full shares of the company in equal percentage. That is 50% each ensuring that all the powers are being held by the two initiators of the company. Since the company is run within the mentality of family ties, it therefore has an increased staff satisfaction, motivation and productivity (Cohen and Sharma, 2016) bringing about the quality training the employees receive. This type of training provided by Alca intends to have a capable working staff that will be swiftly propel the company in achieving its objectives.

The UK also has a capable market system. With companies such as Roper Rhodes leading the market in sanitary production, Alcaplast will have to act extra to be able to penetrate that market.

UK’s Competitive Landscape

The sanitary industry in the UK market is perfect condition. The market share does not bring about the influence of price over the products availed in the market. The market also has multiple players who are in business with the same homogenous product. To bring its perfect condition in place, it is clear that the individual organisations do not have the influence over the markets price of products. In the UK, the competition that there is against the Alca Company are the Mira, Ideal Standard and Bathroom brands, and it’s because these three brands offer a similar range of prices for their products just as Alcaplasts’. Alca puts itself aside from these companies due to its family-run business image.

To bring up a clear sight on the Alcaplast, a SWOT analysis will be undertaken.

SWOT Analysis

STRENGTHS

WEAKNESSES

Distinct clear bands with excellent use of colors and symbols that will reinforce their brand.

A family-run image that will boost the staff motivation and morale

Are innovative and that plays a role in maintaining of the business.

From the award they have received, they have a competitive advantage to the rest in the sanitary business.

Their leading position across Central and Eastern Europe gives Alcaplast a leadership position.

Their increased profit across the years and its desire for expansion indicates its success in the sanitary industry.

Alcaplast has no mission statement and that results in a maze of confusion in the eyes of the consumer.

Poor power distribution as 2 people are totally in control of the company.

Increase in operational profit is also increase in debt as shortcomings need to be considered for profit to be made.

Wide target audience which means increase in costs of advertisement

OPPORTUNITIES

THREATS

Customers and suppliers have little power over the business.

Perfect condition market structure bringing the ease of Alcaplast to expand its business in the UK.

The family-run business can be used as a point of differentiation from large competitors and retailors.

Internal pressure from the industry and high number of players resulting in competition.

Risk of substitution by the current market holders.

Bretix and other external sources threatens Alcaplast’s existence due to its terms of staffing, law, taxes, imports and export operations.

Table 1: Alcaplast’s SWOT Analysis

Market Entry Options

Specific location. Location when gaining entry to a new market is meant to bring about a strategic point where the company can set up its activities and be a success. The choice of the location should favour the growth of the company in the new market. Alcaplast’s plan to set up their facilities, and strive to deliver their goods and services all across the Western side of Europe beginning with the United Kingdom, they have to put other factors in mind. They have to be able to find a specific and strategic location in which they can site its operations and strive. The decision of the location has a big impact when it comes to the revenues and costs.

London is a favourable place in which Alcaplast can commence its market exploitation. The immense traffic of people gives Alcaplast a wider market to reach with its products. Since Alcaplast has a variety of brands in its disposition, they could begin its advertisement on the London market. Their quality products are bound to get the attention of many seeking materials of quality and also those looking for the elegance brought about by the design.

Location decisions are to be done by taking into consideration its customers and their convenience. The company should then set up a housing area where its working staff will be hosted as they participate of the everyday activities. London is also a favourable place to house their employees or their employees to house themselves. the traffic first brings about the ability to find a working staff among them and therefore is a strategic place to establish its entry.

Direct exporting. Direct exporting is one of the most established forms of operating in a foreign market involving the extensive marketing of foreign goods and services in a foreign country. Advantages of exporting includes the minimal risks exposed in the foreign country as manufacturing is home based. Alcaplast could benefit from this strategy if they can maintain their manufacturing at their home-based location more so since they use cheaper materials from Asia.

Participating in exporting activities when gaining entry into a new market gives the Alcaplast company an opportunity to be able to gauge the ratings available within the foreign market before they themselves could begin investing in manufacturing activities. Doing so could assist Alcaplast Company be able to know the better option as to whether they would maintain their manufacturing on their home base or they could establish one on the foreign market. London is still an appropriate better export location. The high population in London makes this activity possible for Alcaplast. For their range of products including cisterns, toilet seats, shower drains and a lot more, they will be able to reach a wider market with the highly populated London. Alcaplast will gain a sense of security in the new market as they only have to establish an interaction with the market.

Joint Ventures. Jointly venturing into a business involves sharing with either two or more investors the ownership of the business. In the entry of a new market, this is a wise option to be partaken as it involves more parties there by bringing about the sharing of the involved risks during the business. Alcaplasts entry into the market jointly with a foreign partner like the Mira Company or the Ideal Standard Company would boost its success. These companies are stiff competitors of the Alcaplast Company and partnering with them will bring the company up to speed. Alcaplast could have a joint financial strength from the venture and also since the companies have been in the market for a while may sum up better ways and strategies to survive in the market.

Risk Assessment Process

Risk Identification

Identification of a risk includes all processes that could help determine any potential threats that could lead a company from achieving its set out objectives. The objective of the risk identification process it to have extensive information of the necessary potential risks and that will help come up with assessment set up and later a management strategy of the risk.

Since the sanitary market in the UK is already under competition and has a lot of players, it will be a risk to Alcaplast to infiltrate the market and to secure a position among the already established players. Also, there are a number of brands who offer the same price range on their range of products. Mira, Ideal Standard and Bathroom Brands have a similar range of products. This brings about the accumulation of the same range of products within the UK market and Alcaplast may have a hard time establishing their brand within their markets. Therefore, for Alcaplast to be able to join the competition and to be ahead of it, it may choose to partner with one of the leading competitor brands. Either Mira, Ideal Standard or Bathroom Brands.

Joint venturing is one of the most viable market entry options for any company. With it comes many advantages of the equal distribution of risks among the partners involved. Joint financial strength will also bring a boost to the establishment of the business and more so in the establishment of the joint company to the newly established market. Even though joint venturing poses a very structural and safe way to establish an effective entry to a new market, there are risks that come with it.

i. Partial Management

Alcaplast’s shares are owned by a couple who also happen to the founders of the company. The family run business has been handling itself well ever since it was founded. A joint partnership with any other brand in the UK will bring about the change of management. Partial management is a major risk as most decisions will have to be agreed upon by the entire board unlike as it was being run by the family where decisions were easy to be made.

ii. Lost Capital and disagreements

Capital invested in a business can be extensively hard to recover once the business has taken its toll into joint partnerships. The capital used in establishing the business in the new market may be difficult to recover either if the foreign market development was successful or not. Also, the expected benefits anticipated by both parties in this case may be different. Different anticipated outcomes may lead to conflicts thereafter from the parties and withdrawal by one party may occur and thus the firm establishment into the market may be hindered. Also, disagreements may occur on which market they should venture into and many more.

Risk Assessment

The risk assessment process focuses mainly on the risks identified by the company. Its main aim is to neutralize the negative impacts in which the intended risks pose to the company. The methodology aims in assessing the risks Alcaplast will face and during its establishment in the UK and brings out an effective and accurate method in which these risks will be managed. The risks presented will be assessed and presented in a way that will ensure that they are clearly brought out and mitigated.

i. Development of Assessment Criteria

The section brings into perspective how the mentioned risks will be dealt with.

ii. Impact Scale and Livelihood scale

It’s the process in which the risks are accessed in their probabilities and consequences if they will be realized. The results after being assessed are prioritized to bring about an establishment of the most to the least critical risk. The risks discussed previously are therefore assessed to come up with their impact scale.

iii. Illustrative likelihood scale

RISK SCALE

(Decreasingly)

FREQUENCY

OF OCCURRENCE

DEFINITION

PROBABILITY

OF

OCCURRENCE

DEFINITION

4

Frequent

At the start after establishment of within the new markets.

Almost certain

More than 90% of the time within the establishment within the UK market.

3

Likely

A few months after establishment of within the new markets.

Likely.

More than 70% of the time within the establishment within the UK market.

2

Possible

A few months more after establishment of within the new markets.

Possible

More than 40% of the time within the establishment within the UK market

1

Unlikely

A few years after establishment of within the new markets.

Unlikely

More than 35% of the time within the establishment within the UK market

Table 2: Illustrative likelihood scale

Likelihood represents the possibility that the given risk that was identified will occur and to the extent in which the company will be affected. The higher the frequency of occurrence the more likely it is to happen. Table 2 above gives us the likelihood of the identified risks, the frequency of their occurrence and also gives an estimate description of what may likely be the result of the occurrence of the risk.

Illustrative Impact Scale

IMPACT SCALE

FREQUENCY OF IMPACT

DEFINITION OF IMPACT

4

Extreme

Financial losses of $X thousand or more.

Profit reduction with $X thousand more.

Revenue reduction with $X thousand more.

3

Major

Loss of market for the products.

Financial losses of $X thousand or more.

Profit reduction with $X thousand more.

Revenue reduction with $X thousand more.

2

Moderate

Loss of market for the products.

Financial losses of $X thousand or more.

1

Minor

Profit reduction with $X thousand more.

Revenue reduction with $X thousand more.

Table 3: Illustrative Impact Scale

The impact scale on the other hand brings about the possible impact the identified risk is likely to cause on the business. The magnitude of the impact if tabulated on the impact table starting with the risk likely to causes the most impact to the organization. Table 3 shows the purported impact scale and their estimated impact to the Alcaplast Company.

iii. Risk and opportunity map

Risk and opportunity map represents a view which identifies the relevant criteria for risks and opportunity assessment.

Case Analysis- Scenario 1

The B&Q suppliers currently hold 17% of the market share in the DYI home renovation industry. Being one of the large suppliers of the sanitary industry in the UK, they could pose the perfect competition in the market with their own-branded sanitary products. The Alcaplast Company having the idea of expanding into the Western Europe markets beginning with the UK don’t find the B&Q as a potential threat. They consider it a competition in which the best and efficient in the market will be able to establish a long-lasting relationship with the consumers. Alcaplast being innovative and ensuring that the products they avail in the market are of premium quality takes it to themselves that they will be able to dominate the UK market. Their high operating profits in 2016 of $1,152,156 and their doubled revenue since 2014 suggest that Alcaplast is at the beginning of its growth stage and therefore it is expected to have higher growth rates and profits in the coming future. There are also competitors of Alcaplast in the UK such as Mira, Ideal Standard and Bathroom Brands who have a similar range of products and also an existence of multiple brands. These may pose a high competition to Alcaplast and it is therefore out of pure reason to make an outline of the potential risks associated with the expansion of Alcaplast in UK.

Case Analysis- Scenario 2

Case analysis brings about the necessary reasonable measures in which Alcaplast Company will take into consideration by using the internal and external risks stated earlier in the research. The measures brought forth are tabulated below.

RISK

MEASURE

Competition with companies with similar product range.

Constant product innovation.

Production of a range of products that are of better quality and design.

Substitution by current market holders.

Increase competitive advantage by increasing high quality in house training programs for staff.

Losing the market to large market holders such as B&Q.

Use the family-run business image to bring out a differentiation from large competitors and retailers.

iv. Risk Assessment

Involves the consideration of the strategic risks locally taking into account the strengths and opportunities that it would have in the decision to venture into the UK market. Alcaplast can easily surpass the UK markets and establish itself firmly securing a place among the competitive sanitary manufacturing companies which have dominated the markets.

v. Risk Interaction

Risk does not exist in singularity. Each risk has its potential and therefore should not be ignored. It is therefore important that a company which is moving toward an integrated view of risks should be able to interact with the risk using different techniques such as risk interaction matrices and aggregated probability distributions.

vi. Risk Prioritizing

Prioritizing risk is a process of determining risk management proprieties by bringing in comparison risk levels against the noted levels of risk. Finance impacts and probability are not the only way risks are viewed, but also on the impact bases of health and safety, reputation, and speed of onset.

1. Risk Response- Mitigating the risks associated with the selected entry strategy. Strategic options have to be developed and actions aiming at reducing the scope of the threat as much as possible.

Joint ventures, being a favourable market entry option involves the companies that will be managed individually. The agreement of two companies working together brings forth the fact that risks and profits experienced will be shared equally among the companies. To better this form of market entry, the risks experienced should be taken into consideration.

Since the partners involved in the venture so not have full control of its managerial activities which may lead to poor management of the company, it would be better to distinguish the managerial roles for both parties. Each should agree to fully managing the company to the depths of the where their role allows them to. Bringing about proper management of the company in the new market.

Venturing in a new market may bring about different anticipations of successes to the partnership. With a view to ensuring the entry to the market is a success with little wrangles, joint ventures should only be agreed upon if both parties have a similar goal they want to achieve within the company.

Capital loss during market entry is a possible risk and this can be mitigated only if both parties venturing jointly agree to incur the losses experienced together.

Conclusion

The report provided a comprehensive expertise over risk and strategic enterprise management for the Alcaplast Company which intends to expand its market over Western Europe with the start of the UK. The thorough research through the external and internal environment of the company brought about the availability of creation of the SWOT analysis which was necessary in the identification and classification of the strategic risks. Other risk management ideas have been incorporated into the research to bring about its effectiveness and to also allow Alcaplast to make a valid mind based decision on whether to expand its markets to the UK or not.

The report has explored an in-depth market structure of the UK, bringing about the possible situations that are likely to encounter the Alcaplast Company as it ventures the new market. The risks involved with the new mission have also been discussed about in depth and how they will be mitigated has also been brought forth. Finally, the expansion of the Alcaplast into the UK has been taken into deep consideration and elaborative discussions have been given to reduce the probability of it failing in its foreign market venture.

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