Case Study Of A Trading Company
Case Study: Creser Hong Kong Limited
Creser Hong Kong Limited (Creser), established in 1998, specializes in sourcing and supplying waste plastics for recycling. Headquartered in Hong Kong, Creser operates in a global market via her well-established network.
In the past ten years, Creser has been handling all kinds of plastic scraps business, including waste collection, processing and recycling. She collects plastic scraps all-over the world, and sells it to Mainland China.
Creser has business operations established not only in the Far East Asia but also in Europe, and in the North America.
Creser’s current realized strategy is a combination of both intended and emergent strategies.
Over years, Creser’s management reviewed and planned deliberately of her short-term and long-term strategies.
In her first five years, in order to stabilize the quality and supply of plastic scraps, Creser intentionally planned to develop and expand her network from Far East Asia, Europe, then to North America.
Later, she established a stronger selling network over the Mainland China by developing five self-owned branches so as to strictly control and maintain an effective selling channel in China.
On the other hand, apart from following those intended strategies, emergent strategies also plays an important effect on the overall realized strategy.
In 2003, Hong Kong encountered the threat of SARS and an economic downturn, and so as Creser. At that time, one of the Germany scrap supplier asked Creser to source for some plastic house-wares in China, and sold it to German. After that experience, the management decided to diversify the business and established a Merchandizing subsidiary. So far, the Merchandizing subsidiary is gaining almost 20% annual profits for the company.
Creser’s Philosophy, Goal & Mission statement
We aim at improving our living environment and at the same time benefiting our shareholders by recycling plastic waste.
Company’s Mission Statement:
“To be a leading supplier of plastic scrap, we are dedicated to providing industrialists increasing profits while helping the environment by providing a continuous outlet for plastic waste.”
Creser’s has a clear goal and mission that her strategic intent is clearly know by employees and her customers. The goal and mission gives a clear sense of direction and purpose to employees and helps the management to make decision and allocate resources. However, her present goal and mission are mainly focus on long-term development. In order to drive the whole company to achieve for the long-term goal effectively, the management should articulate and deliver a more concrete short-term goal to all level of staff and avoid any ambiguity.
Internal Assessment – Strength & competitive advantages
1. Stable and High level of Quality with a well established Supply Chain
Creser has striving to develop and stable and reliable supply chain around the world. Nowadays, she established a large supply network in most of the developed countries such as Europe, USA, South America, Japan, and Far East Asia. The presence of a reliable supply chain enables her to provide a good quality of recycled scraps to her customers and thus gain a good reputation among the Chinese Market.
2. Continuous innovation and explore new products
Apart from dealing with current plastic scraps, the company dedicates a lot of effort on searching and monitoring different kinds of new compound plastics materials in the market. There is a “Research & Development” department that focus on developing innovative ways on recycling different plastic compound scrap. By providing and sharing new recycling ideas to client, the company is able to sell a bigger variety of plastic scraps to clients, and further explore its market niches.
3. A growing business
Creser has grown substantially over recent years, and has experienced global expansion. For instance, it allies with overseas suppliers and logistics companies. Besides, the existing product lines are able to maintain high profit margins. Generally speaking, the profit margin on low-valued plastic scraps like PVC is about 10 to 15 percent; and there is about 25 to 30 percent profit margin generated from those high-valued plastic scraps such as PC and PMMA.
Internal Assessment – Weaknesses
1. Lack of leadership skills lead to low efficiency & productivity
The top management and senior executives in Creser lack of management and leadership skills. Few of the managers possessed these skills already, but there was no internal system to allow them to benchmark their competencies and identify areas for improvement.
2. Lack of an efficient Information Management System
The existing information system is not able to support the firms’ international logistics system. Also, the system is not sophisticated enough to help the Sales & Marketing department to generate valuable sales leads.
3. Poor responsiveness to customers
Due to the poor management skills and an inefficient Information Management System, the general responsiveness to customers on various level in the organization is seems to be poor.
For instance, purchasers are not able to identify the updated market trend and global changes in the plastic scrap industry, this leads to a mismatch between the company’s supply and customer’s actual demand. Besides, customer response time is slow in the Sales department that, the time for sales persons to take for a service to be performed is unsatisfied. Example is some of the newly placed orders may pend for almost one week for the sales person to issue a formal Contract for client to sign and confirm.
External Assessment – Opportunities
1. An Expanding Target markets
Creser targets her market in China, which is large in size, have growth potential, and have an identifiable niche for Creser’s competitive advantages such as cost, performance and economies of scales.
From Creser’s perspective, the products tapped into a high growth market, and can be produced with significant cost savings compared to traditional manufacturer because of the ability to use ‘dirty’ and commingled plastic.
2. Unexplored Markets
There are many untapped and under-developed buyer markets, such as India & South Africa, which offer opportunities to the company to exploit market development.
External Assessment – Threats
1. Market barriers to Post-consumer Plastic Recycling
In terms of global supply and demand on recycling plastics, increases in virgin resin production capacity will keep ahead of, or at least keep pace with, increases in demand for plastic resins. Therefore, barring any unforeseen events, such as factory upsets or sporadic export markets, prices for virgin resin should not experience any wide price variations. However, in order for post-consumer resins to maintain or expand their current market share, advances in collection, sorting, and processing techniques will be necessary in order to maintain or increase price competitiveness with virgin resin.
Maintaining price advantage over virgin resins is important because, in general, businesses use plastic scraps only when they represent a price advantage over virgin.
In general, recyclers of plastic products would use a significant amount of post-consumer plastic scraps if the prices were at least 20 percent lower than that of the competing virgin resin.
2. High cost of Collecting, Sorting, and Cleaning
One of the elements adding to the cost of post-consumer plastic scraps is the labour-intensive process of collecting, sorting, and cleaning plastics recovered through curb-side or drop-off programs. Since plastics have a high volume-to-weight ratio, the cost of collecting plastics is higher than other residential waste types. Once delivered to a recycling centre or material recovery facility, the plastics are generally manually sorted, although automation will be the trend of the future.
These costs may result in post-consumer plastics prices that are only marginally less than virgin resin prices.
Functional-Level strategies are directed at improving the company’s effectiveness from the aspects of efficiency, quality, innovation and customer responsiveness (Galvin, Peter, 1970). Aiming at improving Creser’s competitive advantages, a set of functional-level strategies that focus on the Sales department are suggested here.
1 Improving Efficiency – Developing top management leadership skills
As mentioned above, one of the major weaknesses is that the top managers and senior executives lack of leadership skills. The solution would require an assessment component to determine existing skill levels and areas for development.
One of the solutions would be developing several team-based seminars that featuring a powerful leadership simulation.
Every managers and senior executives should participate in these seminars and form specific teams. Each team should present with a clearly defined set of leadership concepts, such as Building Strategies, Aligning the Organization, Accelerating Change and Learning, and Leading People Across Countries and Cultures.
2 Improving Efficiency – Employee training programs
Creser should provide regular training to her staff, especially to the Sales Team on the aspects of developing business ideas, attaining better reputation & customer satisfaction, dealing with rivals’ fierce competition and so on.
Most important is top management must have a long-term commitment on holding all these comprehensive employee training programs in a continuous basis.
3 Improving Responsiveness to Customer – Customer-oriented sales strategies
In order to achieve a high level of customer satisfaction, a customer-oriented sales strategy should be imposed on the Sales Department. The strategy should include four steps: identify, differentiate, interact with customers and customize the behaviour towards each customer (Gronroos, Christian 1997).
3.1 The first step is to identify customers in as much detail as possible. The names and positions of decision-makers as well as influential people shall be specified. Customer at every location and division has to be specified and shared with the rest of the organization.
3.2 Since customers have different values and needs, they have to be differentiated. Creser needs to categorize the customers depending on their needs, value and profitability. Hence, the customers can be treated differently depending on each of their needs and the company’s resources can be prioritized in order to achieve the best gain of the customers.
3.3 Two objectives with the customer-oriented sales strategy are to improve cost efficiency as well as effectiveness in the interactions with customers. An effective interaction is not just less expensive but also useful in order to produce information that is helpful when creating good customer relationships. All relationships are different and there is thereby important to adjust the forms of each relationship to the context of previous interactions with the customer. The interaction stage is closely connected to both the differentiation and the customizing steps. When the customer needs are defined a methodology for how to use the customer feedback is needed.
3.4 In order to retain customers, it is important to customize the behaviour towards each customer and thus meet their individual needs. Information from the interaction between customer and sales department is needed in order to treat the customer in a way that corresponds to their needs. Services are easy to customize but customer-oriented strategy does not necessarily has to be about customizing every product and service to each customer. In most cases mass customization is enough in order to give the customer an exclusive feeling. This is also a more cost efficient way of customization. Mass customization is not just about products and services. Delivering, invoicing, arrangement, financing and reporting is other important areas of customization. (Peppers, Don and Rogers, Martha 1996)
4 Improving Responsiveness to Customer – enhancing customer relationships
Every sales-person should maintain contact with customers during and after the sales process. By doing so, every order and customer can be closely followed and understood, and thus can lowered the complaint rate in the whole selling cycle. Another main reason to maintain good relationship with customer is that sales-persons can gain more product development ideas, company’s competitive landscape and industry knowledge through the contact.
In fact, when implementing any of the change programs, human aspects should be treated in the same way as mechanical or technical aspects of the project from a planning perspective.
1. Overcoming resistance
Approaches to dealing with resistance, which includes solving the underlying problems and concerns causing the resistance as well as a detailed communication plan, should be incorporated into the planned strategy. It is sometimes helpful to assign a project team member to “work” a specific resistor. As a manager, it is easy to overlook these time consuming tasks the project team member has been assigned. Without incorporating these activities into the project plan, problems can emerge in managing the project team resources effectively.
2. Maintaining momentum
With any change program, it is necessary for the project plan to be broken into easily definable phases. Everyone involved in the project should be fully aware of which phase they are currently in. In change projects of significant size these phases overlap and it can be very confusing. It is natural for every sales team members to temporarily shut down, especially if the previous phase was late and a final push for completion was necessary.
The goal of the programs leaders is to use communication, leadership, and human resource management skills to avoid the normal downtime between program phases.
3. Project time management
“Project time” is different from regular work time. During the execution of the change projects, unanticipated tasks will come up that must be completed without revising the deadline. Communicating this fact of life is a top priority for project leaders, especially with an inexperienced project team.
It is crucial for Creser to maintain good relationships with her customers and stakeholders if she wants to keep the business to grow. Without maintaining a cohesive and reliable relationship, Creser may not only fail to achieve any higher annual revenue, but also harm its own business.
While continuing to squeeze the most out of her current products, Creser should applies technological expertise to develop a comprehensive Customer Relationship Management system so as to manage and maintain the business among all of her stakeholders. Then a further growth the coming years is expectable.
Galvin, Peter; 1970. et al. Strategic management: an integrated approach. Second edition 2007 by John Wiley & Sons Australia, Ltd.
Gronroos, Christian 1997. et al. Relationship marketing: Interaction, Dialogue and Value. Finland: Swedish school of Economics and Business administration, 1997.
Peppers, Don and Rogers, Martha. Building Business Relationships One Customer at a Time. London: Piatkus, 1996