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H J Heinz Weighted Average Cost Of Capital Harvard Case Study Analysis

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H J Heinz Weighted Average Cost Of Capital Case Study Solution & Analysis


Introduction

H J Heinz Weighted Average Cost Of Capital Case Study Help is a popular global brand name in technology market, founded in 1938 by Lee Byung Chul, in South Korea. H J Heinz Weighted Average Cost Of Capital deals in large number of product categories consisting of Semiconductors, Telecommunications, Digital Media, Digital Appliances and many more other electronic products. Historically, the company's core clients include the Original Devices Manufacturers (OEMs), which utilized to sell Organization products withtheir own brand name. Till early 1990s, the core competency of Org depend on its low price offerings than its rivals by manufacturing existing items at economies of scale. Its consumer circle includes Original Devices Manufacturers (OEMs), who used to sell H J Heinz Weighted Average Cost Of Capital Case Study Analysis items with their own trademark name. Corp was not merely understood outside Korea. There were likewise no or little interest in constructing the brand internationally. Marketing budget was controlled by production department with a focal point on supplying low-cost products.During the 1997 Asian Financial Crisis the business practically got bankrupt, but with the Vision of Chairman Lee it completely turn its fortune around and in 2002 was listed the top 25 most valuable business on the planet. When Kim was employed as a Chief Marketing Officer in 2000 the business was not even listed. He rearranged Venture as a global brand name and informed his divisional managers to understand marketing and its importance. Now their goal is to reach the top 10 by 2005.

Issue Declaration

Business's transition from a product based to a marketing company is not going as efficiently as planned.Overcoming the reluctance of divisional managers to integrate marketing efficiently is still a major challenge. Developing a consistent brand name identity across the whole world and utilizing marketing techniques that finest fits the regional culture is no easy job. The M-net program analysis have actually been actually practical in determining the high and less prospective development areas, however allocation of resources appropriately is not well received amongst the supervisors. There is no consensus amongst the hierarchy concerning the best matched future method.
Executive Summary
Situational Analysis

H J Heinz Weighted Average Cost Of Capital Case Study Help efforts for constructing its brand across the world was started after presenting the "brand-new management effort" by Chairman Lee in 1993. The goal was to transform Business from a cheap OEM to a high value-added product supplier. To make the vision of Business a reality, Chairman Lee appointed Yun as a vice chairman in 1997. Yun had a quite clear photo in his mind about how Venture can change from a low end to a high end product service provider. He understood that change can just be done through placing Enterprise as a company offering high-end items and this might just be done through high level of marketing.

In spite of having a clear vision about how to build Enterprise brand, with a possible support of its executives, Yun faced a number of marketing challenges in early years of its efforts.

One of the marketing obstacles for Yun was the perceptions of executives about the value of marketing. They thought about marketing and selling as same tools and believed that quality items do not required marketing for increasing sales. As their focus towards marketing was quite low in their previous organisation practices, and the existing marketing requirement was too much high, the gap was too wider and to fill this space with wrong understandings about marketing was rather challenging for Yun.

Along with it the product range of the company was increasing with the ripening of brand-new item ideas by the R&D sector of Venture. Yun had a challenge to carry out marketing planning and to develop marketing budgets for existing as well as for new products from the very start, and this would take a big time.

A big shift would be needed in present marketing expenses to develop the Corporation brand. This would result in increased marketing expenditures for Company and might disturb the administration regarding increased costs, as they were hesitant to marketing expenses formerly and a sudden huge shiftwould make them disrupt.

Internal Analysis
SWOT Analysis
Strengths


Venture strengths lie in its substantial item portfolio. Corp has biggest number of patents in the market with total variety of 15499 patents granted in United States( USP). Large amount of R&D spending has allowed the company to grow its product portfolio at a greater rate than its rivals. H J Heinz Weighted Average Cost Of Capital Case Study Solution spent about $13.079 billion on its R&D sector in 2016, which is 7.3% of its overall profits.

Another strength of H J Heinz Weighted Average Cost Of Capital Case Study Solution is its capability to establish ingenious items at a constant rate. It major shows for the development and product developing of Corp is that the business has gotten many awards for its development and product style.

Unlike Apple and other competitors, Business is focused on producing devices which can be easily integrated with any kind of open source Os (OS) and software. This provides Org an edge over Apple gadgets.
Porter's 5 Forces Analysis
Organization's capability to produce high-end products at low cost of production is likewise one of the significant strength of Venture as it allows the company to record more market by providing quality items with expense control.

Weak points

Business's weak points are concealed in the business's reliance on outsourcing software application for its devices due to company's failure in developing software application, unlike Sony. H J Heinz Weighted Average Cost Of Capital Case Study Help also has low revenue margins as compare to Apple due to big difference in the costs of Apple and Company with a much lower distinction in quality.

Opportunities

Opportunities for H J Heinz Weighted Average Cost Of Capital Case Study Analysis lie in the growing Mobile phone market and the business's effectiveness in the market. Venture currently runs in about 80 nations and the company has an opportunity to increase its geographical expansion by moving towards more emerging markets outside Asia.

Risks

The vibrant market environment of innovation industry posture an extreme hazard on Enterprise's survival and force the company to spend much of its earnings share on R&D in order to survive in the long run. The market saturation in developed nations i.e. saturation of mobile company is also a huge threat for the company's growth in the existence of strong rivals like Apple.

4 P's of Marketing
Swot Analysis
Product

Enterprise provides quality items and has a rather abundant portfolio which caters to various sectors. LCD and mobile phones are the biggest products of Corp, whereas DRAM is likewise not far behind in comparison of them.

• LCD/ TELEVISION
• Laptops.
• Cellphone.
• A/c unit.
• Desktop computer.
• Hard disks.
• Washer.
• Refrigerators.
• Cams.
• Microwaves.
• Flash memory.
• DRAM.

Rate.

H J Heinz Weighted Average Cost Of Capital Case Study Analysis utilizes both market competitive and market skimming rates strategies for its variety of items. In competitive prices it changes the cost according to the competitors in order to acquire advantage, whereas, it uses market skimming method where the item has an included worth and by offering a couple of items it can reach break-even.

Location.

It has among the very best supply chain networks, with retail suppliers, their own sole suppliers, E commerce channels like Amazon and so on. All its products are prompt supplied to the selling place/ delivered to the consumers directly in case of online order.

Promotion.
Vrio Analysis
It utilizes both offline & online channels of promo to market their items. Paid item ads, social promotion and digital ads are utilizes to produce awareness about Venture items.

Value Chain Analysis.

It's an analytical structure for recognizing organisation activities that add worth or competitive advantage for the company.

Incoming Logistics.

It has one of the most effective and effective supply chain network and has more than 2700 suppliers across different markets around the world. Almost 80% of which is based in Asia and the remaining around the globe. For its incoming logistics it owns various logistics firms as it subsidiaries. It takes care of its providers and creates a harmonious relationship with them and even minimized their payment cycles to boost this relationship further which includes value to their chain network.

Operations.

Enterprise's core competency is its mass making it produces 90% of its products internal. Divided into three different divisions its operations are namely IT & Mobile Communications, Device Solutions and Consumer Electronics. It is preserving operation centers worldwide to further add value to its value chain network.

Outbound Logistics.

Its outgoing logistics system efficiency is one of the primary factors H J Heinz Weighted Average Cost Of Capital Case Study Analysis is able to take on Apple. Enterprise's own Electronic Logitec system plays a significant function in the outbound logistics operations. It even performs the tasks of collection of payment, settling insurance claims, etc. on behalf of Corp.

Marketing and Sales.

Drawing in target client attention towards the product is done through marketing and sales to communicate with them the value and competitive advantage the product uses. H J Heinz Weighted Average Cost Of Capital Case Study Solution advertising budget is continually growing since they started their repositioning worldwide and will continue to do so as they are continually wanting to invest and expand in high possible development markets. The budget is spent on occasions, print and media ads, public relations etc.

Corp put their consumers at the leading and constantly aim to deliver unmatchable consumer service standards. By adding a direct support line to call them 24 hours they have even more increased the added value of Corporation service.

Segmentation.

H J Heinz Weighted Average Cost Of Capital Case Study Analysis has actually diversified market segmentation, based upon its arrangement of wide range of items to a great deal of customers. Enterprise target consumer segments can be divided into 3 categories i.e. H J Heinz Weighted Average Cost Of Capital Case Study Help IT and Mobile Communications, Business Consumer Electronic Devices and Company Gadget solutions.

Geographic.

H J Heinz Weighted Average Cost Of Capital Case Study Analysis geographical division is based upon 2 requirements i.e. area and density. Enterprise serves about 80 countries worldwide with its products supplied to Urban as well as Rural areas of the nation. The Organization is likewise growing its global existence and the company's versatility in locating its plants motivates global expansion of Organization.

Group.

The demographic segmentation of H J Heinz Weighted Average Cost Of Capital Case Study Analysis is based upon gender, age, life-cycle phase and profession. Venture produces products that can be utilized by both women and males. The target consumers for Corp IT and mobile communication products have an age range of 18-65 with majority at a young or newly wed life process stage. They are mainly professionals, trainees and workers. Apart from it, Corporation Consumer Electronics are targeted to a consumer sector with an age range of 25-65. They are mainly workers and experts. Nevertheless H J Heinz Weighted Average Cost Of Capital Case Study Solution Device Solutions are targeted at students, employees and professionals with an age variety of 25-65.

Psychographic.

The psychographic segmentation of H J Heinz Weighted Average Cost Of Capital Case Study Analysis s based upon the social class and the life style of the customer. Organization target customers on the basis of social class are generally upper middle, middle and working class customers, as Business offer items like mobile phone not much cheaper i.e. Motorola in addition to very little costly i.e. Apple. It offers quality items to middle level consumers at a slightly high price than others targeting the exact same sector.

Behavioural.

H J Heinz Weighted Average Cost Of Capital Case Study Analysis bulk target consumers have unique behavioural qualities. They are drawn in towards Company due to the fact that of its moderate costs with a degree of quality.

Quantitative analysis.

Sales of Venture has actually increased amazingly from 16 billion $ in 1997 to 44.6 billion $ in 2002, and the net profit of.48 billion $ to 5.9 billion $. It has likewise decreased its debt from 15 billion $ to 4.6 billion $. Digital media is the largest selling category of Organization with sales of 13.9 billion $, whereas, Telecommunication and Semiconductors sectors both reached 11 billion $ in sales. Incomes/ sales are increasing however net profit is not increasing appropriately due to the fact that of the high overhead cost. New expansions and employing's were the primary reason of the boost in the overhead costs, with china currently not offering any profit to Corporation, however there is so much capacity in the present market with 75 % yet to be checked out.

Qualitative analysis.

Yes, this decision is based upon the mission of Kim to target the younger audience and produce an international brand image of the business. Whereas, the core strength of the company is currently producing however long gone are those days when great products were offering themselves. In the present age marketing is really important and business can not succeed without it. Kim has currently begun to strengthen the marketing activities of Corp and soon it will become one of its core strength like producing if not better.

VRIO.

Worth.

Org operates designs, makes and sell a huge portfolio of customer electronics. It runs in an extremely competitive environment and has successfully positioned itself as the maker of quality products. So, the answer is yes.

Rarity.

As, said earlier that H J Heinz Weighted Average Cost Of Capital Case Study Help operates in an extremely competitive environment, which indicates all the companies have comparable products. The response for rarity is no.

Imitability.

Due to the nature of the industry, it is extremely easy for rivals to comprehend the performance of the items and quickly make their own models. Yes, Org is just behind IBM in registering brand-new patents every year, but the benefit is really short term in this industry.

Company.

Chairman Lee has totally turn-around Corp, from going nearly bankrupt throughout the Asian monetary crisis of 1997 to the top 25 company on the planet. Definitely yes there appertains company in the company and the results speak for themselves.

External Ecological Analysis

PESTLE Analysis

Political

Being a multinational brand name spread almost in every nation worldwide, bulk of the environments like U.S.A., Europe, China and so on, are really conductive for its operations. It faces some political pressures in less industrialized nations where law and order situation is not excellent. Latin American, African and some Asian countries fall in this classification, where political instability do have a result on H J Heinz Weighted Average Cost Of Capital Case Study Help operations.

Economic

Buying power of clients is essential for companies like Business to grow and succeed. Emerging markets like India, middle-eastern nations etc. provide growth opportunities, whereas, due to economic crisis even the customers of industrialized nations suffer badly. It is extremely crucial for the company to keep an eye on the continuous economic circumstance of the nation prior to entering the market.

Socio-Cultural

Multinational business need to deal with numerous social and cultural problems throughout its operations in a foreign nation. Corporation has also dealt with lots of concerns however have adopted to the regional environments of the majority of the nations extremely well. It has tailored its products, practices, policies and so on appropriately in order to be successful.

Technological

With a yearly expense of 2.4 billion dollars in Research & Advancement, and with continuous innovative product launches, H J Heinz Weighted Average Cost Of Capital Case Study Analysis is one of the top ingenious companies of the world. With a clear mission to be ahead of the rest when it concerns technological improvements, Organization has actually increased to the no 25 of the top effective business of the world.

Legal

Each nation has their own laws and policies, being a multinational company Company have to strictly follow those laws in their jurisdictions. Failure to do so, will result in major legal repercussions. It has to study or hire a local law expert prior to beginning its operations in a specific country.

Environmental

With the rising awareness among consumers about the ecological & ethical infractions of business, Organization needs to ensure that it follows all the safety guidelines. Environmental damages, ethical misconducts are not acceptable and in some countries the effects can be extremely extreme. On the other hand it needs to do some Corporate Social Duty practices to reveal the locals that it cares about their environment and individuals.

Porter's Five Forces

Danger of Replacement

Danger of replacement for Organization's each product category is rather considerable. Running in an extremely vibrant market lead the company to deal with a high threat of alternative. Elements for high risk of replacement for H J Heinz Weighted Average Cost Of Capital Case Study Help Smart device include the existence of high variety of suppliers and Market saturation in developed nations, that make the expense of switching for consumers almost zero. Alternative threats for Enterprise visual screen lie in the changing lifestyle of customers. Customers can switch to viewing visuals at home towards outdoor activities. In addition to it, Enterprise printing options items are threatened by the increasing attraction of consumers towards cloud storage.

Competition Among Existing Companies:

The rivaly among Org and its close competitors is extreme. The major factor behind this is the method of market saturation in different number of product categories, forcing Org to present more ingenious features in existing products and new ingenious products to preserve its growth. Other element for the intense competition among the competitors is the little product distinction amongst the items. The prominent players in the technology industry are rather familiar with the importance of R&D costs for their survival and are encountering a race of marketing and R&D costs, to record the market. The major competitors for H J Heinz Weighted Average Cost Of Capital Case Study Analysis samrtphones include Apple, Motorola, LG, Nokia, Huawei, OPPO and so on. High competitors rivalry results in the varying market shares which can be seen in Exhibit F.

Bargaining Power of Providers:

H J Heinz Weighted Average Cost Of Capital Case Study Analysis has a large supply chain consisting of about 2700 providers across the world.( Company Sustainability Report, 2016) Supplier's bargaining power for Business is low as Corp runs economies of scale and its orders are of possible size and worth. These big orders enable Corporation to work out costs with its suppliers. Nevertheless, due to incapability of H J Heinz Weighted Average Cost Of Capital Case Study Help to build its own software, it needs to outsource its software development to Google, which becomes a prospective provider of software for Organization, resulting in high bargaining power of Google. Although, in the majority of cases Corp has a power to work out costs, but it supply significant prices to its providers to build a strong supply chain and to have strong relationships with its suppliers.

Bargaining Power of Purchasers:

Market saturation in most of the product categories also make the bargaining power of buyers more intense in for Organization. In spite of igh bargaining power Enterprise is rather capable of selling its items at a higher rate than much of its competitors, due to high end quality product and a reasonable brand image.

Danger of New Entrants:

Threat of brand-new entrants for Company is quite low. Among the major aspect for low risk of new entrants is the high competition in the industry. The requirement of big amount of capital to enter in the marketplace is likewise among the possible barrier to entry. Together with it, requirement of huge proficiency and research study and development expenditures for survival in the industry likewise make new entrants reluctant to go into in the market. Market saturation is also one of the barrier of entry in innovation industry. High bargaining power of suppliers force the players in the industry to charge as low rates as possible and this can just be accomplished by production performance. Brand-new firms, in majority cases, do not have the production effectiveness, for this reason increasing the dangers for entryway in the innovation industry.

Competitive Analysis

Venture's high product diversity provides it distinction from its competitors. It is one of the 3 top brands by market share. Unlikely to its close competitors consisting of Sony, Intel and Nokia, who focus majority on a single item classification with Sony concentrating on customer electronic devices, Nokia on cell phones and Intel on chips, Venture had a big R&D spending on all of its item classifications which make it possible for the company to earn possible profits from sales of almost all of its items. (See Exhibition) However, due to the broad item range the business deals with high variety of competitors.

The company ranks first in 4 item categories i.e. DRAM Chips, LCD Displays, Cinema TVs and Microwave, in terms of global market share, among 8 various item classifications. Org was the international leader in producing DRAM, SRAM and NAND flash chips. Enterprise incomes from chips was less than Intel however its revenues from chips was growing quicker than Intel and has actually grown close to the profits levels of Intel, as given in the case Exhibit 2.

Together with the chips Business mobile market was likewise growing at a high rate than its rivals i.e. Motorola and Nokia. Venture's mobile phone's sales development was 51% as compare to Motorola with just 4% and Nokia with zero sales growth. The significant reson behind Org's high development despite of higher prices than Nokia and Motorola was the business's high-end quality cell phones.

Business was likewise reaping the benefits from increasing market share of high end LCDs as given up case Display 3. The significant reason, making the company enable to get the chance is its mass production at low expense. Sony was the most significant competitor for H J Heinz Weighted Average Cost Of Capital Case Study Solution in LCD market, nevertheless, it had actually likewise started joint endeavor with Org in 2003 for LCD manufacturing, reducing the competition for Enterprise.

Porter's Competitive Method

Low Expense Leadership strategy of porter is totally executed by Business the method they attain economies of scale by reinforcing their core proficiencies of production. They always bring something brand-new and ingenious whether it's a service or an item.

Alternatives

Alternative Solution 1

The Chief Marketing Officer (CMO) of H J Heinz Weighted Average Cost Of Capital Case Study Solution would create a new brand image by targeting the more youthful generation of the specific country. As, particularly smart phones of Org are incredibly popular amongst the more youthful group.

Pros

1. It is the very best technique to build Consumer Lifetime Worth (CLV) by developing a long-lasting relationship with clients. Develop commitment through delivering value and reap the benefits for long-lasting, as research has showed it is more affordable to keep current clients than to bring in new ones.
2. Another pro of this alternative is that word of mouth spread quicker amongst younger people and which in turn will bring in new clients for my products.

Cons

1. Old clients who were connected with Company before may not like this brand-new image the business is trying to portray.
2 It will incur further expenditures to reposition some items and it might not even bring success as the patterns alter very rapidly amongst the younger group.

Alternative service 2.

It would be done by setting up training workshops during which significance of marketing will be taught and numbers will be offered. Marketing environment ought to be created internally first as real marketing starts inside the corporation.

Pros

1. Its pro will be that all the marketing approach supporters will come out and likewise the opposite ones.

Cons

2. Its con can develop an extremely unhealthy environment in the workplace, as individuals often withstand change due to the fact that they fear it.

Recognize the best option

Option is the finest as it plainly has more pros because when a Customer Life time Value is developed the company will profit from it till that customer is alive and has purchasing power. Plus, our target consumers are the younger generation which are bound to live longer than the current aging individuals. However, Venture's primary goal is to develop loyalty amongst its consumers and make them bought it from them and even purchase their various products also.

Execution Plan

• Targeting more youthful generation through social marketing, creating a relate to them like Pepsi do with music. And set the expectations sensible and attainable.
• A group consisting of best marketing and sales experts should be put together, and both views ought to be taken into account before securing the resources needed to implement the plan.
• Thorough communication of the strategy ought to be done as it is very crucial for everyone to be on the exact same page to make it work.
• Tasks and timelines ought to be build and interacted appropriately to each person responsible.
• The manager need to utilize a dashboard which reveals the progress of all the tasks which have been done or about to be done and by whom.
• The manager need to keep an eye on and keep a consistent look at the general and specific efficiency.
Since any brand-new pattern or policy may come in due to which all the things already planned have actually to be adjusted, • Everyone must be willing to adjust midway. It's much better to have contingency strategies currently prepared.
• At the end of the campaign the supervisor need to communicate the outcomes and if successful need to celebrate with the team.

Spending plan

The M-net program exposed compelling analysis about the low and high growth possible areas and how much marketing budget plan must be designated appropriately. This change the budget allotment of different nations and numerous managers were dissatisfied and argued but the analysis done by the program was accurate and showed figures like The United States and Canada and Russia growth potential warranted a 35% allowance while they were getting 45%. Whereas, China and Europe ought to be receiving 42% however were rather offered 31%. It truly helped to fairly disperse the resources and catch more customers by spending more on advertisements on the high development potential areas of the world.
Recommendations
Conclusion

H J Heinz Weighted Average Cost Of Capital Case Study Analysis is a leading 25 company in the world now and prepares to get ahead of Sony who sits presently at no. 20. Its consistent investment in R&D and innovative practices have propelled them to new heights however for them its' just the start and they want to be among the top 3 brands on the planet. They totally turnaround from nearly declaring bankruptcy during the Asian Financial Crisis to a world popular brand name, known for quality and development. Their value chain and their core proficiency their production capability, along-with international brand image structure have seen their sales go from 16 to 44.6 billion $ from 1997-- 2002. With additional growth in China and other emerging markets those numbers will just increase further in the future. Their marketing efforts must be directed towards more youthful market amid the internal arguments about marketing and ought to develop Customer Lifetime Worth as it will not only give them benefits now however will continue to gain it till the client life time. As the cost of retaining the client is more affordable than attracting a brand-new one.