New Flyer Industries Innovation in Transit Case Study Help
Technological Factors:
Both the US and Canada are considered to be highly technologicalcountries, which use advancedequipment and heavily invest in new technologies. Technological advancement and the use of highly technological equipment enforce the industry to produce such products which are technological friendly. A quick upgrade in technology enforces the company to bring highly technological equipment to the market.
Environmental Factors:
The world is facing a number of environmental issues regarding CO2 emission and the companies are trying to use environment friendly process and practices. The trend of healthy environment enforces the industries to implement ecofriendly practices, bringing products that are ecofriendly and fulfilling the CSR responsibility. Using ecofriendly practices ultimately improves the cost of production. All the heavy duty bus and motor coach manufacturing facilities have been registered to ISO 9001, 14001 and OHSAS 18001 i.e. quality, environment and safety certifications.
Legal Factors:
The FTA (Free Trade Agreement) between Canada and the US as well as NAFTA in late 90’s improved the businessestransactions, such as: import and export between both the countries. Moreover,the country is strictly implementing its rules, regulation and policies in order to secure the right of every employee, through which every citizen would get equal rights. The Employment Act 1996 and Equality Act 2010
Porter's 5 ForcesModel:
Barriers to Entry:
Barriers to entry in automobile industry is considered to be higher. A number of barriers exist, such as:significant capital requirement, strong industry record, wide portfolio, understanding the customer needs, efficient supply chain network, customer loyalty and government regulations reduce the threat of new entrance.
Supplier Power:
The bargaining power of supplier in automobile industry is considered to be higher to moderate. Innovative design, after sales services, strong industry record and brand image strengthen the bargaining power. However, few customers and rapid advancement inthe new technology moderate the bargaining power.
Buyer Power:
The bargaining power of buyer is considered to be high to moderate. The reason behind the high bargaining power is the fact that there are only few customersexisting in the market. Moreover, zero switching cost and availability of substitutestrengthen the power. The strong brand image of supplier, innovative design and low cost moderate this power.
Competitive Rivalry:
Competitive rivalry in the automobile industry is higher. The industry is composed of a few local and foreign dominating players, who monitor and cater the overall demand of transportation industry. The growing trend to use the new product and zero switching cost of customer, increases the rivalry among the competitors.
Substitute Threat:
The threat of substitute in the public transportation industry is considered to be moderate. The substitute of public transportation is private transportation. Public transport provides all the comforts same as the private transport, at lower cost.Therefore, low preference towards the private transport reduces the threat of substitute.
Risk Weight Scenario Planning:
| Elements | Increase+/ Decrease - in profitability | Impact on business (low-high) | Risk weighted impact
1 low risk -10 high risk |
Interpretation |
| Increase in cost of production due to ecofriendly practices& process | Decrease | low | 2 | As the fulfilling its CSR responsibility therefore the company is using the ecofriendly practices and process in production of its products. Increase in cost of production would reduce theprofitability slightly and would impact the business therefore, it is considered that its risk weightage is lower. |
| Increase in interest rate | Decrease | moderate | 4 | It is seems that the debt level of the company is low therefore, low dependency on debt moderately impact on the business. However it will reduce the profitability as the fixed cost of the company would improve. |
| Innovation in technological equipment | Increase in long run and reduce in short run | moderate | 8 | By the upgrade of technology of fixed assets would be beneficial in long run. Heavy investment is required to upgrade the technology therefore it would reduce profitability in short run. The reason behind the high risk weightage is that public transportation industry is highly dependent on the technology so it might have a chance that the company would not generate profit in long run and at the time when the company would start to generate positive cash flow the new technology will come in the market and once again the company would have to upgrade. On the basis of this assumption, risk weightage is considered to be high. |
| Increase in tax rate | Decrease | high | 7 | Increase in the tax rate would have impact on the business because the tax rate increase the tax expense of the company which ultimately reduce the profitability. |
VRIO:
| Resources |
Value |
Rare | Imitation | Organization | Competitive Advantage | |||||
| Broaden and diversified portfolio | Yes | Yes | Yes | Yes | Sustainable competitive advantage | |||||
| Culture of innovation/ Product innovation | Yes | No | Yes | Yes | competitive parity | |||||
| Customer loyalty and satisfaction | Yes | No | Yes | Yes | Temporary competitive advantage | |||||
| Marketing expertise and strong supply chain | Yes | Yes | Yes | Yes | competitive parity | |||||
| Availability of capital | Yes | Yes | No | Yes | Temporary competitive advantage | |||||
| Largest production capacity | Yes | No | Yes | Yes | Competitive parity | |||||
| Strong Brand image | Yes | Yes | No | Yes | Sustainable competitive advantage | |||||
| Dominant market share | Yes | Yes | Yes | Maybe | Temporary competitive advantage |
Financial Ratio Analysis:
Financial ratio analysis is done in order to understand the financial position of the company. The financial ratio analysis in done by calculating four types of ratios, which are given in the excel sheet and appendix-1.
Profitability Ratio:
Under the profitability ratio we have calculated gross profit margin and net profit margin. Both margins of the company show that how efficiently it is using its resources and generate profit. In other words, the percentage of profit in sales. It seems that both the margins have continuous increasing trends, which is considered to be the favorable signs for the company. However, the profit margins of the company are very low, as a percentage of sales is lower due to high operating and fixed expenses. The company should reduce its expenses in order to increase the percentage of its profitability ratios.
Growth ratio is also calculated and taken it as a part of profitability ratio. It is seems that the growth of the company year on year basis is fluctuating. However, the company always have a high positive growth that enables the company to maintain its dominating position in the market. Growth ratio of the past few years shows favorable position of the company..........................................
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