Sunrise Incorporation Case Study Solution
Internal Analysis
VRIO Analysis
A VRIO analysis could be conducted to evaluate the competitive advantage of the two rival organizations and the two rival divisions. The following Table 1 shows a detailed VRIO analysis for the 4 firms.
Table-1: VRIO Analysis
| VRIO Analysis
|
Sunrise | Invacare | Quickie | Guardian |
| Competitive Advantage | Diversified Business Model. | High customer satisfaction. | International recognition of the colourful standard wheelchairs. | Innovative Capabilities. |
| Value | Yes-provides more flexibility an innovation capabilities to the organization. | Yes-leads to the high market share of the company. | Yes-enable the division to be the most profitable division. | Yes-enables the division to offer a diversified product portfolio. |
| Rarity | Yes-no other competitor has diversified business. | No-the competitive products are also able to satisfy consumers. | No-international recognition is a common advantage. | Yes-other seems to have comparatively low number of products in the portfolio. |
| Imitability | Yes-but it is difficult to imitate the diversified business model. | Yes-product improvement could be achieved to acquire high consumer satisfaction. | Yes-expansion towards international markets could lead to the international recognition. | Yes-but it is difficult to acquire certain innovative capabilities. |
| Organization | Yes-ability to manage business divisions. | Yes-ability to maintain market share. | Yes-ability to maintain quality. | Yes-ability and resources available to introduce new products. |
SWOT Analysis
SWOT analysis could be conducted to compare the two rival organizations i.e. Sunrise and Invacare and the two rival divisions i.e. Quickie and Guardian. Appendix 2 shows the SWOT analysis of the four organizations.
From Appendix 2 it could be seen that from the two rival organizations Invacare is most strong rival with high market share and efficient financial performance. However, the management of all of the business operations by one single organization is one the major weaknesses of the Invacare. Both of the rival organizations have certain opportunities in the form of the growth of the Wheelchair industry and could expand their businesses to achieve potential profits and growth. However, both organizations act as a threat for each other in terms of capturing market share.
Moreover, form the Appendix 2, it could be seen that from the two divisions Quickie is the most strong business division of sunrise with large scale business, a comparatively high market share and strong financial performance. However one of the major weaknesses of Quickie is its dependence on the single product i.e. Wheelchair. The trends towards the development of health care sector and the industrial growth shows an opportunity for both of the business divisions. However, the risk of market capture from the rival division acts as a threat for both of the divisions.
Alternative Strategies
Various strategies could be considered by Sunrise to deal with the current situation and to increase the market share and the profit margins.
Merge both the Divisions
The company could merge both of its divisions. It could lead to the increase in the profitability and the business scope of the Guardian which would ultimately increase the profitability of the business. Moreover, it would lead to the end of the competition among the two business segments. However, the merger could increase the confusions among the management of both of the divisions and the company could face employee resistance over the decision.
Acquisition of Jennings
Another option for the company to increase its profit margins and the market share is to acquire Jennings. The acquisition could enable the company to expand its business and achieve a high market share. Moreover, the company could be acquired at a high share discount as the market value of the Jennings shares is low.
Expansion of Guardian towards other Business Segment
Another strategic option for Sunrise to increase its market share and the profit margin is to direct Guardian to expand towards other business segments rather than the Wheelchair segment to avoid the competition among the divisions. This could enable Quickie to maintain its market share and its competitive position in the market.
Recommendations
On the basis of the above analysis, the company is recommended to consider option 1. As option 1 would not only end the competition among the two divisions but it would also improve the overall performance of Guardian which has a market share of only 1%. Moreover, tit would not require a substantial amount of funds that is required to acquire Jennings under option 2. Along with it, the company could pursue the option on early basis as it does not require development of a new product as in option 3. Therefore, the company should consider option 1 to increase its market share and profit margins and reduce the competitive rivalry among the two divisions.
Conclusion
Although, the company is going through a critical situation with increasing rivalry among the two divisions along with the comparatively low market share and returns, but these problems could be resolved by merging both of the divisions. The merger would improvise the financial performance of Guardian and end up the rivalry among the two divisions. An increase in the financial performance of the divisions would lead to the increase in returns and the market share of the company without any substantial investment.
Appendices
Appendix-1: Porter’s Five Forces Framework
| Porter’s Five Forces Framework | ||
| Threat of New Entrants |
High |
· Encouragement of patient’s mobility and self-sufficiency in health care sector.
· Growth in standard wheelchair industry i.e. 5%. · Low Competitive Rivalry.
|
| Threat of Substitution | Low | · Non-availability of any strong substitute in the market. |
| Competitive Rivalry | Low | · Low number of rivals in the industry. |
| Bargaining Power of Buyer |
Low |
· Low number of Wheelchair manufacturers available in the market.
|
| Bargaining Power of Supplier | Moderate | · Availability of a number of suppliers in the market.
· Large number of raw materials required to manufacture a Wheelchair. |
Appendix: SWOT Analysis
|
SWOT Analysis
|
Sunrise |
Quickie |
Invacare |
Guardian |
|
Strengths |
· Strong financial position with a profit margin of 5.7%.
· Social Responsibility Programs · Diversified management. · Innovative capabilities |
· High profits
· Larger scale · High market share i.e. 19% than Guardian
|
· Single sales force
· Largest market share i.e. 37% · High financial performance
|
· Extended line of products |
|
Weaknesses |
· Low market share i.e. 20% in total.
|
· Single product line | · Management of a large number of operations under a single roof. | · Comparatively low profits.
· Small Scale. · Low market share i.e. 1% |
|
Opportunities |
· Trends towards development of healthcare sector. | · Growth in the Wheelchair industry i.e. 5% | · Trends towards development of healthcare sector. | · Growth in the Wheelchair industry i.e. 5% |
|
Threats |
· Market share capturing by Invacare.
· Competition among divisions could lead to further decline in the market share. |
· Competition by Guardian. | · Market share capturing by Invacare.
|
· Competition by Quickie. |
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