Selkirk Case Competition
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Transcript of Selkirk Case Competition
Selkirk Case CompetitionSelkirk Case Competition
Group Members:Group Members: USAUSA AustraliaAustralia
Kenny LokeKenny Loke Nicole SeagerNicole SeagerDawn MartiDawn Marti Helen ZhuHelen ZhuBrent HeltonBrent HeltonAndrea BrownAndrea BrownBrian BarkerBrian Barker
Selkirk GroupSelkirk Group
Mission StatementMission StatementThe Selkirk Group of Companies intends to remain an The Selkirk Group of Companies intends to remain an
independent, reliable and efficient manufacturer of independent, reliable and efficient manufacturer of high quality products and services to the national and high quality products and services to the national and
international building industry.international building industry.
The Australian Clay Brick The Australian Clay Brick Manufacturing IndustryManufacturing Industry
GDP 0.09% (1997/98)GDP 0.09% (1997/98)– 70% new housing construction70% new housing construction– 15% renovations15% renovations– 15% commercial construction15% commercial construction
Market Share by regionMarket Share by region– 36.3% New South Wales36.3% New South Wales– 18.9% Queensland18.9% Queensland– 17% Western Australia17% Western Australia– 16.9% Victoria*16.9% Victoria*
*Selkirk’s base
The Australian Clay Brick The Australian Clay Brick Manufacturing IndustryManufacturing Industry
Market Demand and PricesMarket Demand and Prices– Industry Turnover Industry Turnover
$906 million (’92) - $780 million (’98) $906 million (’92) - $780 million (’98) – Clay brick production = 1,532 million Clay brick production = 1,532 million (1997/98)(1997/98)
» 87% housing construction use87% housing construction use
» Premium bricks $500 per 1,000 bricksPremium bricks $500 per 1,000 bricks
» Seconds $300 per 1,000 Seconds $300 per 1,000
» Pavers = 15% of production but < 10% sales Pavers = 15% of production but < 10% sales revenuerevenue
The Australian Clay Brick The Australian Clay Brick Manufacturing IndustryManufacturing Industry
Market Demand and Prices (continued..)Market Demand and Prices (continued..)– Expected outlook 1998/99 showed increased Expected outlook 1998/99 showed increased
sales to $880 millionsales to $880 million– Long term outlook showed market demand Long term outlook showed market demand
decreasing due to new cheaper materials decreasing due to new cheaper materials (concrete, steel) and construction techniques(concrete, steel) and construction techniques
» Steel-framed buildings (2/3 cost of brick-veneer)Steel-framed buildings (2/3 cost of brick-veneer)
The Australian Clay Brick The Australian Clay Brick Manufacturing IndustryManufacturing Industry
Market Demand and Prices (continued..)Market Demand and Prices (continued..)– Prices stable across markets based on product Prices stable across markets based on product
differentiation and distribution networksdifferentiation and distribution networks» Overhead, Wages and Salaries, Electricity and fuel Overhead, Wages and Salaries, Electricity and fuel
dominated cost structure in the industrydominated cost structure in the industry
CompetitorsCompetitors– National National – RegionalRegional– LocalLocal
Market Share of Brick Industry in Australia
37%
24%
15%
11%
9%4%
Boral LTD
CSR LTD
Pioneer INTL
Futuris LTD
Brickworks LTD
Selkirk
The Australian Clay Brick The Australian Clay Brick Manufacturing IndustryManufacturing Industry
International BusinessInternational Business– Australian bricks gaining export markets across Australian bricks gaining export markets across
Asia due to their natural colors and strengthAsia due to their natural colors and strength Global TrendsGlobal Trends
– Australian brick and paver products reputed as Australian brick and paver products reputed as having more durability, better water repulsion, having more durability, better water repulsion, and a wider display of vibrant color attributesand a wider display of vibrant color attributes
Domestic TrendsDomestic Trends– Cheaper Materials (steel,concrete)Cheaper Materials (steel,concrete)
Economic EnvironmentEconomic Environment
Internal VariablesInternal Variables AcquisitionsAcquisitions
– Phillips Bricks and Phillips Bricks and Pottery Ltd. (1982)Pottery Ltd. (1982)
– Hick Timbers (1987)Hick Timbers (1987)
– Shepparton Bricks and Shepparton Bricks and Pavers (1992)Pavers (1992)
– Stratblox (1998)Stratblox (1998)
External VariablesExternal Variables Currency Factors Currency Factors
(exchanges, controls,etc.)(exchanges, controls,etc.)
Asian crisisAsian crisis– Joblessness in JapanJoblessness in Japan
– Bitterness in KoreaBitterness in Korea
– Political opposition Political opposition rallying in Thailandrallying in Thailand
Currency ExchangeCurrency Exchangehttp://finance.yahoo.com/m3?uhttp://finance.yahoo.com/m3?u
1 Australian Dollar (AUD) = 1 Australian Dollar (AUD) = .39 British Pound.39 British Pound
.61 US Dollar.61 US Dollar2.33 Malaysian Ringgit2.33 Malaysian Ringgit4.79 Hong Kong Dollar 4.79 Hong Kong Dollar
5.08 Chinese Yuan5.08 Chinese Yuan21.30 Taiwan Dollar 21.30 Taiwan Dollar
73 Japanese Yen73 Japanese Yen743 Korean Won743 Korean Won
5387 Indonesian Rupiah5387 Indonesian Rupiah
Group Sales Estimates
05
1015202530
Year
Sa
les
Re
ven
ue
($A
mil
lio
ns)
Our ObjectiveOur Objective
To enhance the Selkirk Group’s sales position To enhance the Selkirk Group’s sales position within the international building industry.within the international building industry.
Distribution LocationsDistribution Locations
What are Selkirk’s Entry Options??What are Selkirk’s Entry Options??
ExportingExporting
In an attempt to combat In an attempt to combat new technology, Selkirk new technology, Selkirk can “strike while the kiln can “strike while the kiln is hot” by acquiring mini-is hot” by acquiring mini-kiln technology and kiln technology and exporting it abroadexporting it abroad
With its vast supply of With its vast supply of raw materials, Selkirk raw materials, Selkirk could also export raw could also export raw materials for assembly by materials for assembly by foreign operationsforeign operations
ExportingExporting
AdvantagesAdvantages Ability to realize Ability to realize
location and location and experience curve experience curve economieseconomies
DisadvantagesDisadvantages High transport costs High transport costs
especially if lower especially if lower overhead costs are overhead costs are available elsewhereavailable elsewhere
Trade barriersTrade barriers Problems/Cost associated Problems/Cost associated
with local marketing with local marketing agentsagents
Market price can equal Market price can equal A$12,000 to A$12,000 to A$17,500/containerA$17,500/container
Licensing/FranchisingLicensing/Franchising
With the possibility of With the possibility of future recovery in the future recovery in the Asian Marketplace Asian Marketplace comes the possibility comes the possibility of licensing or even of licensing or even franchising the Selkirk franchising the Selkirk Group’s processes, Group’s processes, designs, copyrights, designs, copyrights, etc.etc.
Selkirk
Licensing/Franchising Licensing/Franchising
AdvantagesAdvantages Low development Low development
costs and riskscosts and risks
DisadvantagesDisadvantages Lack of control over Lack of control over
technology/qualitytechnology/quality Inability to realize Inability to realize
location and location and experience curve experience curve economieseconomies
Inability for Selkirk to Inability for Selkirk to engage in global engage in global strategic coordinationstrategic coordination
Joint VenturesJoint Ventures
ChinaChina– Logistics Logistics
– Cheap laborCheap labor
– Availability of other Availability of other clay sourcesclay sources
KoreaKorea– LogisticsLogistics
– Cheap LaborCheap Labor
– Good local consumer Good local consumer marketmarket
Joint VenturesJoint Ventures
AdvantagesAdvantages Access to local Access to local
partner’s knowledgepartner’s knowledge Sharing development Sharing development
costs and riskscosts and risks Politically acceptablePolitically acceptable Creates possibility to Creates possibility to
establish a just-in-time establish a just-in-time (JIT) system with (JIT) system with supplierssuppliers
DisadvantagesDisadvantages Lack of control over Lack of control over
technologytechnology Inability to engage in Inability to engage in
global strategic global strategic coordinationcoordination
Inability to realize Inability to realize location and experience location and experience curve economiescurve economies
Culture Clash-diverging Culture Clash-diverging ideals can create conflict ideals can create conflict (i.e. quality specifications)(i.e. quality specifications)
Wholly owned subsidiariesWholly owned subsidiaries
Wholly owned subsidiariesWholly owned subsidiaries
AdvantagesAdvantages Protection of technology Protection of technology
and quality standards and quality standards Ability to engage in global Ability to engage in global
strategic coordinationstrategic coordination Ability to realize location Ability to realize location
and experience curve and experience curve economieseconomies
DisadvantagesDisadvantages High costs and risksHigh costs and risks
CountertradeCountertrade
Due to the financial crises in Asia, foreign direct Due to the financial crises in Asia, foreign direct investment could prove difficult, if not impossibleinvestment could prove difficult, if not impossible
Possibilities of CountertradePossibilities of Countertrade
BarteringBartering of Australian clay for mini-kilns of Australian clay for mini-kilns
CounterpurchaseCounterpurchase arrangement where Malaysia arrangement where Malaysia purchases bricks from Selkirk in AUD and Selkirk purchases bricks from Selkirk in AUD and Selkirk agrees to use the proceeds from the sale to purchase agrees to use the proceeds from the sale to purchase mini-kilns produced by Malaysiamini-kilns produced by Malaysia
A A CompensationCompensation or or BuybackBuyback arrangement in which arrangement in which Selkirk builds a plant in or supplies clay to China in Selkirk builds a plant in or supplies clay to China in return for a certain percentage of that plant or clay’s return for a certain percentage of that plant or clay’s output as partial payment for the contract output as partial payment for the contract
CountertradeCountertrade
AdvantagesAdvantages Can finance an export deal Can finance an export deal
when other means are when other means are unavailable unavailable – Difficulty raising the Difficulty raising the
foreign exchange necessary foreign exchange necessary for importsfor imports
– Cash deals are not preferredCash deals are not preferred– Governmental influenceGovernmental influence
Creates possibility of Creates possibility of export opportunity later on export opportunity later on through goodwillthrough goodwill
DisadvantagesDisadvantages Typically hard currency is Typically hard currency is
required for business required for business transactionstransactions
Can result in exchange of Can result in exchange of poor or defective goodspoor or defective goods
Can require worldwide Can require worldwide network of operations in network of operations in order to utilize or dispose order to utilize or dispose of goodsof goods
Criteria for selecting best optionCriteria for selecting best option
1.1. Identify ObjectiveIdentify Objective
To enhance the Selkirk Group’s sales position To enhance the Selkirk Group’s sales position within the international building industry.within the international building industry.
Criteria for selecting best optionCriteria for selecting best option
1.1. Identify ObjectiveIdentify Objective
2.2. Identify critical factors influencing that Identify critical factors influencing that objectiveobjective
Critical Factors of EntryCritical Factors of Entry
Source(s)/Quality of Raw Source(s)/Quality of Raw MaterialsMaterials
Knowledge of Foreign Knowledge of Foreign MarketMarket
Political RiskPolitical Risk Asian CrisisAsian Crisis New TechnologyNew Technology Cost of ExportingCost of Exporting Exchange RatesExchange Rates StrategyStrategy
Criteria for selecting best optionCriteria for selecting best option
1.1. Identify ObjectiveIdentify Objective
2.2. Identify critical factors influencing that Identify critical factors influencing that objectiveobjective
3.3. Pros and ConsPros and Cons
4.4. Narrow down to two best optionsNarrow down to two best options
5.5. Always have a contingency planAlways have a contingency plan
Recommendation ARecommendation A
ExportingExporting– In an attempt to combat new technology, In an attempt to combat new technology,
Selkirk can “strike while the kiln is hot” by Selkirk can “strike while the kiln is hot” by acquiring mini-kiln technology and exporting it acquiring mini-kiln technology and exporting it abroadabroad
– With its vast supply of raw materials, Selkirk With its vast supply of raw materials, Selkirk could also export raw materials for assembly by could also export raw materials for assembly by foreign operationsforeign operations
Recommendation BRecommendation B
Joint VenturesJoint Ventures– ChinaChina
» Logistics Logistics
» Cheap laborCheap labor
» Availability of other clay sourcesAvailability of other clay sources
– KoreaKorea» LogisticsLogistics
» Cheap LaborCheap Labor
» Good local consumer marketGood local consumer market
ContingencyContingency
CountertradeCountertrade– BarteringBartering of Australian clay for mini-kilns of Australian clay for mini-kilns
– CounterpurchaseCounterpurchase arrangement where Malaysia arrangement where Malaysia purchases bricks from Selkirk in AUD and Selkirk purchases bricks from Selkirk in AUD and Selkirk agrees to use the proceeds from the sale to purchase agrees to use the proceeds from the sale to purchase mini-kilns produced by Malaysiamini-kilns produced by Malaysia
– A A CompensationCompensation or or BuybackBuyback arrangement in which arrangement in which Selkirk builds a plant in or supplies clay to China in Selkirk builds a plant in or supplies clay to China in return for a certain percentage of that plant or clay’s return for a certain percentage of that plant or clay’s output as partial payment for the contract output as partial payment for the contract
Thank youThank you
Questions??Questions??