1.1 Research Background
This research has conducted a study on the optimization of EOS Com pany’s low cost-focused strategy. Established in Guangzhou, EOS Company is a private integrated enterprise of medium-sized, which focused on manufacturing and selling indoor lamps of Europe types. Since its inception in 1999, it had shown a st eady growth in sales and a sound development momentum. In 2015, however, things were different. The global economy experienced a recession except for the USA which kept an intact econom ic recovery, Europe in particular , witnessed a weak econom y with slow growth. Under this situation, how to survive in the incr easingly competitive environment has become a critical issue for EOS Com pany to deal with, and which is also th e focus of this research. By adopting the analytic tool of value chain, the focused lo w-cost strategy being applied by EOS Company has been investigated to find the rooted cause leading to the reducing orders and clients. As a solving plan, optim ization of the current strategy has been put forward, to help EOS Company regain its com petitive edge in market competition and for its sustainable de velopment. In view of this, this a rticle bears important significance, both in theory and in practice.
After years of development, EOS Com pany has grown into a powerful entity and has obtained certain brand recognition. And its repu tation in European market is excellent with a number of customers loyal to its products.
With its steady growth, EOS Com pany has accumulated massive assets both tangible and intangible. And thanks to its continuous development and research on products, it has developed series of qualified products co vering thousands of varieties, and m ore than a hundred of customers have built business connections with it. In the m eantime, however, as both external and internal envi ronments change constantly, some existing systems and plans can no longer meet the needs of a highly-developed market, leaving it behind some other outstanding competitors, despite the f act that it ha s made slow progress in certain fields.
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1.2 Research Theme and Research Significance
1.2.1 Research Theme
Influenced by an overall slowdown econom y worldwide, 2015 is a di fficult year for EOS Company, a number of its competitors having closed down. In the m ean time, however, some swam against this current and witnessed sales growth. EOS Company, in turn, had seen slashed orders. Compared with previous years, its orders in the first 8 month of 2015 decreased by 30 %, consumer confidence also slumped with a great number of them shifting to other companies. Under this situation, the production cost was increased and net profit was decreased from 7% to 3%. All these have indicated that EOS Company is impelled to r eassess its focused low cost strateg y and find the cause to the existing problem s. Only appropriate remedy can help the com pany break through the dilemma.
1.2.2 Research Significance
This article is written b ased on case study. With the use of competitive strategy, the author has provided suggestions on the im provement of existing strategies for the further development of EOS Company.
The author has worked in the lighting industry for years, and as the com petition in lighting industry becom es increasingly intensive, it draws upon the author that choosing a proper strategy based on scientific analysis of both internal and external environments and implementing it thoroughly are vital to the long-term development of the company. This thesis has important significance both in theory and in practice, as it has applied the knowledge acquired from MBA to the reality.
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Chapter II Literature Review
Literature review can comprehensively present the research achievements of optimization strategy, at the same time, it provides solid theoretical basis for the following case analysis.
2.1 Core Concepts
2.1.1 Strategy
Strategy is used to help com panies win com petitive advantage to ou tperform their competitors. Managers usually adopt different strategies to str engthen their m arket position and to attrac t customers, ultimately attaining the goals of successful management.
Based on different strategy formulators and performers, the company strategy can be divided into three levels, th ey are corporate-level strategy, business-level strategy and functional-level strategy respectively. Corporate-level strategy, which can also be called general strategy, is an overall plan of top level. It is focused on establishing long-term goals for the com pany. Business-level strategy, also known as com petitive strategy, is a strategic plan formulated to better m anage a certain business. Its m ajor task is to improve the com petitiveness of the company in a specific field. Functional strategy is aimed at achieving the goal of maximizing the utilization of resources. It is a concrete implementation plan laid down for different functional departments. For most companies, the strategic goal is to help its owners attain maximum value, and to achieve this, the f ollowing criteria must be m et: 1. strengthening profitability . 2. Ensuring profit growth. In view of the first requirement, companies can employ certain strategy to lower the cost or add products’ value. And for the second, appropriate strategies should be adopted to increase sale volume or companies can strive to exploit new market.
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2.2 Related Theories and Literature Review
2.2.1 Competitive Strategy Theories
Michael Porter defined competitive strategy in his book Competitive strategy published 1980, which can be explained as: both aggres sive and defensive actions which can be adopted to estab lish room for m aneuver during intensive competition, aiming to successfully deal with pressure from the five competitive forces. The ultimate goal of competitive strategy is to win remarkable investment and revenue for the company.
Porter holds that the essent ial foundation for the pursuit of sustainable development lies in possessing permanent competitive advantage. For companies, this competitive advantage can be attained through two appr oaches: low cost or dif ferentiation. When combining these two approaches with the bus iness scope, three fundamental strategies which are vital to good performance can beelicited: cost leaders hip strategy, differentiation strategy and focus strategy. And the only way to com pete effectively is to employ these strategies and put them into action.
Following Porter’s competitive strategy，Arthur A. Thom pson, Margaret A. J. Strickland and John E. Gamble developed the competitive strategy by breaking it down into more independent segments, including overall low-cost provider strategy, broad differentiation strategy, best-Cost Provider strategy, focused differentiation strategy, focused low-cost strategy. These five types of strategies are shown in the figure 2-2
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Chapter III Case Description .................. 19
3.1 Lighting Industry ...................... 19
3.1.1 D Table 4-4 evelopment Status of the Lighting Industry in China ......... 19
3.1.2 Lighting Market in Europe ..................... 21
Chapter IV Case Analysis ............................ 33
4.1 Analysis on Overseas Competitive Environment ................... 33
4.1.1 Macro Environment .................... 33
4.1.2 Chinese Home Decorate Lighting Products Export to EU ..................... 34
Chapter V Suggestions ..................... 60
5.1 Optimization of Current Competitive Strategy ..................... 60
5.1.1 Control and Managem ent of the Cost Optimization of Production and Manufacturing ..................... 60
5.1.2 Control and Management of the Optimization of Procurement Cost ..... 62
Chapter V Suggestion
5.1 Optimization of Current Competitive Strategy
Based on the above analysis, causes to th e problems existing in focused low cost strategy of EOS Company have b een excavated. To ensure that the competitive strategy can effectively play its proper role in gaining competitive advantages for EOS Company, the following measures are put forward to optimize its cur rent competitive strategy:
5.1.1 Control and Management of the Cost Optimization of Production and Manufacturing
The author mainly highlights the adopting of the combined method of just-in-time production system and comprehensive quality management to conduct the cost control and management of production and manufacturing.
Implementation of Just-in-time Production Method
The just-in-time system is also called tim ely production system, i.e., JIT created by Toyota of Japan in the 1970s. It adopts the production m ethod pulled forward by the information of value chain links after cost value chain. Under this kind of production way, the company sets such customer requirements as quantity demanded, quality and delivery time as the starting point and then arrange the production task in back to front turns. What to produce, the quantity , quality requirement and delivery tim e of l ast procedure is decided according to the speci fic requirements put forwarded by the next procedure.
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Chapter VI Conclusion and further study
6.1 Conclusions
Through this research project, the f ollowing achievements and conclusions have been obtained:
This article selects the competition strategy optimization of EOS Company as the research object through field study on the EOS Company and its competitors. And it is conducted in line with the route of problem discovering-problem analyzing-optimization planning; the author has also collected a great deal of primary materials from internet and rela ted journals, then explores and evaluates the current competitive strategy of EOS Company with the academ ic aid of corporate s trategy, management, marketing and organizational behavior, etc.
The dissertation starts with an introduction of the subject background as well as relevant theories of m odern corporate competition strategy. Next it expatiates the current status of EOS Company together with the challenges confronting it, and in this part, both internal and external environm ent, threats and opportunities have been analyzed by adopting industrial value chain analysis and fi ve forces model. Then, the internal conditions of EOS Com pany have been investigated to find its strength and weakness with the analytic tool of company value chain.
Through the above analysis, the co mpetitive advantages of EOS Company have been excavated, based on which it is clearly stat ed that f ocused low cost stra tegy is adaptable to the current situation. At la st, plans have been put forward for the optimization of current strategy , including optimization in various fields: com pany operational structure, hum an resources management, product developm ent and planning, purchasing cost control, for the goal of regaining its competitive advantage and sustainable development.
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