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Macpac is an entrepreneurial start-up company which deals with the outdoor and adventure equipment industry based in New Zealand. The company was started by Bruce McIntyre in 1973 by acquiring Christchurch-based bag manufacturing and repair business, when he was 19 years of age, by the year 2006 the company became an iconic brand in the New Zealand and had survived during it bad times in late 1990 and early 2000¶s. Macpac started at home and in 2006 it was working as a global industry having its markets in Europe, America, Asia, Vietnams etc as well. In this assignment, I will be discussing the factors that lead Macpac to achieve success in international market till from 1973-2006. The below are the factors which lead to achieve for the success of Macpac internationally from 1973-2006.
Growth and development of Macpac.
Internal growth: A business can achieve the market development, and can initiate the penetration by utilising different resources like people, money and time internally. To increase the overall sales of products sold is the purpose of market penetration strategy. Thus growing revenue and widening the market share. The other internal growth strategy is the market development that engages new potential customers and untouched segments of the market.
Looking at the case of Macpac, it is quite clear that the focus of their focus has been on the quality of the products right from the beginning from the stage of manufacturing and thus creating a brand image in the minds of the customers. Alongside their focus was on culture and structures within the organisation which made the internationally successful. Due to their new penetration strategies they were able to widen their trade in the European countries. After observing the continues decrease in their hardcore products, company adapted the new strategy and now focused more on design and fashion. For this new change they also appointed specialised persons for fashion pilot project which was started in New Zealand. They concentrated on both the domestic and international market to groom their business. (Harrison, 2008)
2 External growth strategies: These types of strategies are adapted to increase the growth rates of an organisation by simply investing their resources in another firm. It is a horizontal type of integration where in a business enters into Memorandum of association (MOU) with the other same line business organisation or firm in other words merging with the other organisation. This merger is often with in the same line, same sized organisations. Merging is mutually desired and is results in formation of essential strategy options which sometimes turns into extraordinary change in the s overall performance of the company. To penetrate into the new market merger strategy is followed by the company. Now in case of Macpac, it is clear that when the company has emerged in 1980¶s and increased its staff by 20 and sales of NZ $300000, at that time the owner of the company (Macpac) Bruce Mclntyre decided merger with a retailer Geoff Gabites. The retailer company of Gabites and his wife shally were dealing with the business of producing cloths, sleeping bags and tents with a limited no. of sales and few profits. The strategy adapted by the Macpac proved to be result oriented for both the companies as both of them formed a marketing association and partnership and work under the same banner Macpac, thus a strong brand was on the launch pad. This brand was the first of its kind in the country producing a variety of products. Hence business experience of both the entrepreneurs helped Macpac to enter in both domestic and international market. (Johnson and Scholes, 2000) (www.apeccp.org) During the year 1990 Macpac started to capture the international business and at the same time sales had jumped to NZ$8 million which is 35% overseas sales. The company started direct business with the Australian retailers by selling them the products. This was achieved because of the work culture and team work. Macpac was considered to be the one of the iconic brands in Newzeland. The director of the company Macpac believed in de-centralisation of powers and was always against hierarchical management style in the organisation. The secret of success for Macpac is behind the team work culture and the production of the quality product. This leads to the lot collaboration in the company. The change in strategy by Macpac in 1996 proved to be successful, wherein they decided to sell their products directly to the overseas retailers, hence resulting in elimination of middle agents from the sales. Till twentieth century this strategy turned to be successful and was running smoothly, but profits of Macpac started to dip down with the start of 21st century, it incurred losses in three years 2001-2005 and there were lots of reasons for that and they will be discussed below.
Reasons for the loses that Macpac incurred during 3 years At the beginning of 21st century, Macpac incurred losses, it had many factors mainly the external and they were political, economical, social/legal, technological collectively which is known as PEST. ECONOMIC POLITICAL THE 9/11 ATTACK CREATED REASONS FOR THE LOSSES INCURRED BY MACPAC SOCIO/CULTURAL
RECESSION WAS CAUSED DUE TO THE
CHANGE IN LIFESTYLE
HIGH TECHNOLGY MEANT HIGH PRICE OF
Political: the incident of September 11 (9/11) on the famous twin towers (world trade centre) of America changed the world scenario and has affected the whole world. It was disaster for the world economy as USA is the hub of the world economy. Macpac was hit by this disaster as well, the sales were dropped drastically by 30% and in the next year by 10 % more. After this attack on American investors from all over the world hesitated to invest due to increasing insecurity and instability in the political environment and the world scenario. Sometimes it was due to high security issues adapted by various countries of the world including US and UK.
Economical: this factor has surely affected the sales and caused losses to the company. As Macpac was focussing on maintaining good quality, so to maintain quality they used highly and advanced technologies and material to satisfy the customers. Due to decrease in fame and trend for adventure sports and outdoor people started aiming and preferred to buy at low price goods instead of good quality and expensive which directly affected the sales of the company Macpac. The downfall of sales was due to this.
Social: At the beginning of 21st century, it was witnessed that fame and trend of adventure sports and outdoors has started to come down tremendously and even was disappearing. The industry associated with outdoor industry was experiencing a sudden shift. As the focus was more on fashion now as compared to adventure. The hardcore business of the company collapsed resulting in the heavy decrease in their sales and ultimately adding to the losses of the company.
Technological: This factor has played a vital role in incurring the losses during 2001-2005 for Macpac. As Macpac was using the advanced technologies to maintain the quality of products these technologies turned to be expensive for Macpac as the trend and fame for adventure and outdoor has decreased tremendously. Due to change in the trend in the market people preferred to buy low price goods and products instead of high quality products which resulted in less demand to the expensive products of Macpac, thus use of these advanced technologies proved to be the one of the factor for incurring losses to the company. (Johnson, 1997)
For Macpac loss incurred during 2001-2005 was worst in life time of the company. Family business atmosphere was encouraged and profit was shared among the employees which was the main part of the culture in the company. It was due to the external environmental factors which lead Bruce, owner of the company to rethink over the present strategies and to rebuild them. As per newly adapted strategy by Bruce, he decided to invest more on the manufacturers from overseas instead of in-house and thus stopped to invest on them. Finally Macpac decided to take new business model which included new strategic changes. The recruitment policy of the company was changed, all the staff and employees were revised and the work force was reduced and focus on some of the relevant things was changed. As a part of new strategy foreign exchange was managed by external resource persons or consultants in order to get rid from the exchange rate problems which were occurring due to new global network. By this new strategy Macpac was a relaxed now as they had to pay their offshore suppliers only after selling their goods and products due to which they were relieved. While implementing these strategies travel costs increased abruptly as they had to move around the world and was because of global work force. Thus budgeting and bonus strategies were revised. As the
5 area of operation was widening and business was spreading all over, resulting in increased number of warehouse and manufacturing plants, a strategy for operating new plans was required. New strategies and plans were made to stock at the right place. The two main departments were production and logistics which were running warehouse and production.
After getting recognition from a small company from New Zealand and then becoming world renowned brand globally. Macpac was running its business successfully in Vietnam, Korea, and Philippines etc. They had been able to manage the offshore communication links with these overseas suppliers like design, logistics and production. The new business model preferred the cheap labour cost force from Asia rather than going for highly advanced technology based machineries used earlier that resulted in high costs of their products. More focus was given to internal strategies like market penetration and market development that resulted in heavy increase in their sales and in the meanwhile acquiring the market share as well because of value based brands, promotional activities and maintained the quality of their products by making regular inspections. While introducing the new business model, Bruce was able to find a desired leader for the organisation. As according to his belief he was the guardian of the company and in 1985 when he took a break for a year resulting in loss for Macpac. Bruce, thus found it essential to hire suitable person having desired leadership skills who could maintain the team culture and the stability of the company. By 1996, he appointed Graeme Lord as a new general manager for the company who had a reasonable past experience of good leadership skills and it was then that Bruce decided to take out a rest after handing over his responsibilities to him.
Current issues of the company
In achieving the targeted goals of becoming different from others Macpac, is having some hindrances in doing so, the control over the company was not satisfactory as the leader ship was lean as well, it was clear at the time when Bruce, the owner of the company took one year break from his work which resulted in lots of looses for Macpac during that period of time and during this period powers in the organisation were centralised which was unfavourable for the company and against the belief of the owner of the Macpac. Another critical issue of the Macpac was the incompatibility of their strategies to resist to the external environment faced by the company. Macpac was not having proper strategy as regarding
6 the price set of their products. They were using highly advance machines and techniques while manufacturing goods which resulted in high input cost or high price for the goods to be sold. But the decrease in the outdoor and adventure trends had left people disinterested and hence they preferred low price and less elite and less standard goods instead of paying higher for the high quality. This issue was seriously resulting in the decrease in their sales. The company had then to go for soft end of their business as its hardcore like adventure and tents etc had collapsed. Trading globally as we have seen resulted in success in various aspects of the company but it had its dark side too. As their whole work force belonged to the home country, New Zealand, an important issue had arisen as these sales personal were supposed to spend about 20 weeks of a year on the roads, therefore, resulting in the wastage of time. Moreover, travelling overseas was costing heavily for the Macpac resulting in the wastage of money as well. While trading globally, to maintain quality also remained a critical issue for the company as manufactured goods were sent from Asia to New Zealand and thus was really hard for the revision or repair of the company. Last but not least was the leadership of the Macpac which remained under shadows as Bruce wanted to take rest out of the running business. This fact was not favouring the conditions of the company as in the mid 80¶s the absence of Bruce resulted in the heavy loss for the company. Leaving of the responsibilities of leadership by Bruce was again a serious issue for the company as a whole (www.landcareresearch.co.nz)
Future of Macpac
While going through the history and present scenario of Macpac it seems clear that the new business plan and strategies adapted and implemented by Macpac could improve the condition of the company. There is some hope from the new leadership as it could certainly help in bringing some fruitful results for the company as Graeme lord possesses has got different approach and leadership style which is flexible and good for the team. On the other side, we can say that company has just recovered back from a bad situation with serious looses and still is not out of danger line. As we know Bruce McIntyre has left all his responsibilities to the new boss Graeme lord of the company, if new boss fails in any aspect or if he leaves the company for whatsoever reason it would definitely be harmful to the company in future. It would surly affect the team culture of the company, as we know the competition for Macpac has grown tuff globally and it is very hard to survive for a company in such a competition. So this
7 becomes the serious threat for the Macpac. If such condition prevails with the company it will be a disaster for it then.
As discussed above all the past and current situations of Macpac, it seems that to remain in the market and to survive long in the present global competition, Macpac needs to frame out some careful strategies for remaining in the competition. So below as some recommendations for Macpac:
Particular strategies must be developed to maintain the internal and external growth. Overall budgeting should be revised as lot of money is spent on travelling so that wastage of money and time can be controlled.
Quality control strategies must be developed as they were lacking this aspect in the new business model.
Organizational culture should be maintained, where team work is supported by decentralization of powers.
Vision and innovation are the main aspects of success therefore it should prevail in order to achieve business objectives. Clear vision should be in employees mind regarding the current position of the company and what steps should be taken to reach the organizational goal. (Balogun, 2004)
BOOK REFRENCES y
Balogun,j et al. (2004), exploring strategic change (2 nd edn) p 248. England, pearson education ltd.
Harisson, J.S and John, C.H (2008), Foundations in Strategic Management (5th edn) p93. Canada, Nelson Education Ltd.
Jhonson,G et al. (2005),exploring corporate strategy (7 th edn) pp402405.England, pearson education ltd.
Jhonson,G et al. (2008),exploring corporate strategy (8 th edn) pp5456.England, pearson education ltd.
Johnson, G and Scholes, K (2000), Exploring Corporate Strategy (4 th edn) pp41-44. Europe, Prentice Hall.
Lynch, R (2006), Corporate Strategy (4 th edn) p463. England, Pearson Education Ltd.
http://www.apeccp.org.tw/doc/APEC-OECD/2003-12/002.pdf Electronically accessed on 25-03-2010
http://www.landcareresearch.co.nz/publications/researchpubs/RR_Paper.pdf Electronically accessed on 26-03-2010
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