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Logistic Management Case Analysis

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Polaris Case Rui’s qualitative analysis

External Factors

Opportunities 1. Moving manufacture to China or Mexico would reduce cost and increase profitability 2. Increasing sales in International market 3. Easy to find well trained trades people in LCCs (China and Mexico) 4. Joint venture or acquisitions in LCCs for market growth would help Polaris get in. 5. Major demand for Side-by-Sides are from southern US (California and Texas)

Threats 1. Economics slowdown in US negatively impact the sales and the trend may continue in the upcoming years. 2. Increasing oil price may add to cost (production closer to customer would be ideal). 3. Macroeconomics perspective: inflation in Mexico and China might not be advantage. 4. Lack of talent in America or trades students don't like their manufacturing place. 5. Laying off 60 trained domestic employees with financial loss of 1.2 million and damage to the brand and may damage brand image.

Internal Factors

Strength 1. Experienced and well respected in the industry 2. Strong sales and brand name 3. Ability to extend product lines given parts and accessories market grew significantly and introduction of “Victory” 4. Established warehouse and distribution facilities in Minnesota, South Dakota, and Winnipeg 5. Proactive approach from management. Looking for ways to improve and save cost

Weakness 1. 80% sales from US while the economy is sinking. Not enough exposure to international market 2. Current location is not considered close to majority of customers. Major customer in south while factory is in North. Increasing oil price may make it worse 3. Talent shortage within the company

Key Success Factor
The key success factor should be the product specialty in the industry and brand name. The strong domestic and uprising international sales number represent the brand value. It hold the reputation of high quality outdoor recreational automobile. Also the image of American heritage

Who is the customer: People from North America are the majority of customers for now, which represents 85% of the market. International market expected to grow 21% in 2010

What do they want: From case: “Made in America”
(Reality reliability and cost)

Building Factory worldwide Pros and Cons

China
Pros: low cost
Cons: cost may rise due to inflation may need to look for inbound areas for factory which affects transportation cost, time difference, cultural dissimilarities, 10 m capital expenditure, 5% tariff on production and transportation, jeopardized delivery time, no more “Made in America”

Mexico
Pros: close to US especially main market, “in-person collaboration” possible, cultural familiarity, No tariff under NAFTA, close to the major market decreases the transportation costs
Cons: startup cost 9.5m, No more “Made in America”

USA
Pro: keep “made in America” culture get employee and customer satisfaction; cross functional collaborations
Con: lost opportunities to reduce cost

Porter’s 5 Forces

Forces that dominate the industry: 1. Recreational/ toy type products, highly depends on economic situations. 2. The product is considered targeting a niche market. Brand awareness is high depend on reputation within its group. 3. The market has no sign of growing domestically given the difficulties in current economy. 4. International market seems growing

Major Competitors/Rivalry: Yamaha, Honda, ArcticCat, Harley Davison

Major Suppliers and barging power: local switch to more developing countries, Cost maybe increasing due to inflation

Major Customers and barging power: 80% North American Increasing International. Side-by-Side mostly Americans from Texas and California. There are competitors lowering costs through moving manufacturing to LCCs.

Threat of new Entrant/Entry Exist Barrier: niche market not easy to copy

Substitute: Not mentioned in the case. Customers may choose competitors due to price, quality or “Made in America” image

Product: ATV, Side-by-Side, Snowmobile

Distribution Channel: Established

Industry Size/ Growing?: High-performance motorsport products/ Staying the same

High fixed Costs: transportation cost is crucial for Side-by-Side

Market Share: Dominate ORV

Global Industry: Increasing demand from global market but still mostly American.

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