Road planning to expand their markets to South

Road Machinery Manufacturing Company                                                              Akhil Rao                                                                                                                                  991486955 Executive Summary: This case is addressed to Mr:Wilkins, Road Machinery Manufacturing differentiate themselves from the market by custom manufacturing construction equipment.  It would be beneficial to RMM to reconcile with QPS. This would allow them to increase its market share from 10% to 25% in the next 5 years. This can be achieved by using an appropriate financial plan, to convince Robson. Introduction: Road Machinery Manufacturing company of Sarnia  manufactures construction equipment, adding the functional body and operational control systems to a customer-provided chassis and front end. RMM has a 10 percent market share in North America and are working towards increasing their market share in North America to 25 percent within in the next five years. They are also planning to expand their markets to South America and Mexico. Critical Success Factors: Road Machinery Manufacturing differentiate themselves from the market by custom manufacturing construction equipment. By doing so they aim to increase their market share to 25 percent.  The company further aims to provide parts  and services to their own product and products of their competitors, in the aftermarket. The company’s demand is cyclical given the fact that their sales vary from $20 million and $40 million.  Problem Statement A financial crunch has led the RMM to shift their courier services from QPS to Roomis.As a result of the the september 11th crisis, the cross-border shipments slowed down to two days. The Vice President of Finance, Bob Robson, decided to switch their courier service from QPS to Roomis, that provided inexpensive courier solutions in comparison to QPS. However, QPS began to face a new set of challenges with Roomis, they had to facilitate cross-border shipments through their own broker, and the pickups in United States were delayed by two to three days. Analysis: Situational Analysis: 1. The Suppliers were reluctant to shift from QPS: The suppliers were reluctant to shift from QPS and began to prepay the freight and bill RMM for it. This means that the company will have to pay its suppliers more, and moving forward with Roomis would not be a profitable option. Further the investments made in the software and  hardware for Roomis would accumulate as sunk cost. 2. Issues with  regards to transportation: * Cross border transportation requires the company to hire an agent, this adds to the transportation cost of the company. Natex, as a secondary player in US, and not meeting the company requirements adds to the cross border transportation issues. Roomis not delivering the components on time, leads to a decrease in goodwill, this has implications on RMMs market share.  3. QPS’s overpriced service: If RMM decides to shift back to QPS, they would require the company to pay a minimum deposit against any shipment sent. QPS has an inflexible payment policy, they would stop the shipments of the cash balance falls below a certain level. This would cause a delays and cause customer dissatisfaction, this would lead a fall in market share.   4 Unsatisfied workers: The September 11th incident has caused a financial crisis, which in turn resulted in layoffs and pay-cuts, this will cause dissatisfaction amongst employees and may have potential leadership threats within the company. SWOT Analysis Strengths: The company has the ability to custom make construction equipment which is allowing them to place themselves strategically in the market. The company has a loyal customer base. Loyal employees who have endured pay-cuts and no bonuses.  Chile and Canada’s free trade agreement enabled the company to expand their market to Chile. Weaknesses: Poor financial planning in terms of logistics. Inexperienced brokers may be a cause for delay in shipments across the border.The company has no contingency funds during the times of the September 11th crisis. Opportunities:  The company can expand their market to South America and Mexico since they have a competitive advantage. RMM can increase its market share from 10 percent to 25 percent if they chose to continue with QPS.  Threats: The company may lose their competitive advantage if the delays continue.They may have a loss of market-share due to the lack of customer satisfaction.The employees may resign if the pay-cuts and the loss of bonuses continue. Solutions: The first solution is to address this issue to Robson and persuade him to switch to QPS, by using an appropriate financial plan.                      Advantages:   The company will not experience any delays with deliveries.                             The disputes with the borders and brokers will be removed.There will be good supplier relationsDisadvantages: The operations are expensive with comparison to roomies. Robson’s values may be hurt.The second alternative would be -to continue with Roomis and RMM must approach other companies that can replace their US partners this will cause a delay in shipment.Advantages: -The company need not switch back to QPS. Robon’s values will not be hurt. There will be no brokers needed to pick up the shipment. Disadvantages: -There can be a cost difference when the management needs to replace the company for its US shipments. The suppliers will not be satisfied, as they prefer QPS. 3. To find a new company that would match the specific logistics needs of RMM. Advantages: The company has higher chances of acquiring better transportation services than QPS and Roomis.There could be timely deliveries  reduced delays.The strong principles of Robson would not be hurt.Disadvantages: -Installation of a new software and hardware may be required, and the old software and hardware will accumulate as sunk cost.Suppliers will be dissatisfied with the shift from QPS. Recommendation: RMM must consider the first alternative as it is advantageous to the company, given that they had good relations with QPS . By addressing this problem in the meeting they can build good customer relations and the number of delays can be reduced.This will also bring back the competitive edge of the company.By arranging a meeting with the suppliers and negotiating between the two companies for having lesser days for the payment(less than 15 days). Then, RMM can meet QPS to negotiate for being more flexible with the minimum deposit. This will allow the delay times while shipping to US from Canada. The ratio of the shipments received from US can be brought down to 30% this would make it to 70% from Canada which will result in favour of both the companies. Implementation: The table below shows the implementation plan : Activity Immediate Before 6 MonthsBefore 1 YearLong term Making an effective financial planXAddress the issue with the stakeholders XXPersuade Robson to switch to QPSXXArrange the suppliers meetingXXMeeting with QPSXXReaching the 25 % market share. XXConclusion: After the above analysis, it would be appropriate for RMM to reconcile with QPS. As This will allow the company to increase its market share from 10% to 25% in the next 5 years. This can be achieved by using an appropriate financial plan, to convince Robson.