Overview of company and
industry
Polaris Industries Inc was incorporated
on September 23, 1994. Polaris is one of the world’s top makers of the off-road
vehicles that comprise all-terrain vehicles, and also side-by-side recreational
and utility Ranger brand vehicles. Polaris also manufactures snowmobiles,
on-road vehicles, such as the Indian and Victory brand motorcycles and small
electric vehicles. Some of the offerings provided by the company include
accessories, replacement parts, and riding gear.
The company also sells
recreational apparels such as jackets, helmets, pants, boots, gloves, goggles,
hats, and leather through the network of independent distributors and dealers.
The strength of Polaris can be evident in areas such as good cash flows from
operations, revenue growth, and an increase in stock price. Despite the growing
revenue, Polaris underperformed as compared with the industry average of 12.6%.
When compared to 2016, the net operating cash flow increased by 712.25% to
$145.54 million in 2017. The company has surpassed the industry average cash
flow growth of 64.57% (The Street Ratings 2017).
The leisure equipment and product
industry do include computer and video game software, bicycles, traditional
toys and games, photographic products, and sporting equipment. The United States
tend to be the largest market for these products and is characterized by
intense competition for consumers based on quality, price, and perceived value
of time at play. The US bicycle industry that includes bicycles, accessories,
and parts is about $6 billion market (The Street Ratings 2017). In the past
years, the bicycle market has been stable, and it is also expected to remain
the same in the near-term. With how the industry is performing, a recovering US
economy and an increase in consumer spending can positively affect this
industry in the future.
External environment:
Porter Five Forces
Rivalry of competing
firms
By having a small number of competitors
in the larger recreational and utility vehicle industry, most of the players in
the market have been able to find their specialties and strengths. Being in
multiple market subcategories, Polaris continues to focus on some of its
strongest product lines that include snowmobiles and off-road vehicles (Polaris
Industries 2017). That tends to be a market that has very little chance of
adding new competitors considering the current state of the economy and also
the high capital requirements needed so as to enter the market. In general, the
industry does face steady growth in good financial times, and it does have a
small chance of decreasing and a small chance of seeing a booming expansion.
The strong brand identity of the company offers them an edge in the product
that they produce best. Because there are just a few competitors in this
industry that has steady growth, but little growth in the number of market
players, the rivalry of competing firms can be considered moderate.
Potential entry of
competitors
In this industry, Polaris is the company
that takes part in a large number of segments than most of its competitors. For
instance, Harley-Davidson only produces motorcycles and their related
accessories (Polaris Industries 2017). That may be largely attributed to the
high capital requirement for entering the industry. The larger expenditure
needed for developing the facilities needed only to build one car, and research
and development cost associated with the design of products is very high. The products produced being classified as
high priced recreational vehicles need a large amount of income to purchase;
thus, shrinking the potential customer base. Products such as all-terrain
vehicles and snowmobiles require particular climates and also a large amount of
open terrain. Such places are shrinking as the population rises and people are
building cities in areas that were bare land. The cost of research and
development, high capital requirement, limited usage and nature of the niche
market does make this market appear as if it will not grow very fast. Due to
all these factors, it shows that the threat of new entrants to the market is
very low.
Bargaining power of
suppliers
Polaris industries have managed to
foster a long relationship with its large number of suppliers. The suppliers
that Polaris selects are those who offer exceptional quality of services, and
they continue to grow their product and innovate together with suppliers. The
company has managed to acquire its suppliers through vertical integration, and
it also continues to do that; hence, it offers Polaris with control over its
supply chain and a large share of profits from the industry. Polaris vertical
integration through the supply chain has resulted in a low bargaining power of
suppliers.
Bargaining power of
buyers
Since there is a small number of a firm
to select from any categories of recreational and utility vehicle industries,
there is a higher chance of a buyer selecting Polaris. The strong identity and
also the fact that Polaris is a larger international dealer; it helps the
company to dominate much of the market for the ATV’s, snowmobiles, and ORVs.
The small number of companies in the recreational vehicle market contributes to
the limited variety of companies that buyers can select from (The Street
Ratings 2017). The fact that there is a limited number of competitors in the
industry and with the large variety of products available to consumers and most
of the products are for recreational purposes; it gives the buyer the option of
finding the right products or just walking aware from the products. These are
factors that contribute to the high bargaining power of buyers.
Development of
substitutes
In many countries, the motorcycles and
other recreational vehicles tend to be leisure items that do lack necessity;
thus, they are largely substitutable by many practical items like cars and even
cost effective means of transportation as bicycles (Polaris Industries 2017).
Because of the lack of necessity, it does increase the threat of substitutes,
which indicate why the market segment normally decline during an economic
recession. Despite the lack of necessity, when a consumer owns a motorcycle,
switching cost to the substitute may range from low to high. Because the
switching cost does vary depending on the alternative means selected, the
threat of substitutes in this industry tends to be moderate.
Threats
Discretionary
spending on the high-end consumer goods have declined a major threat for
Polaris as with the decline in spending on high-end consumer goods; it means
that the company will observe a decline in sales; thus, affecting its profits.
The decline in spending for high-end consumer goods is a demographic factor
since it is a threat affecting the target market of Polaris.
Fierce
competition: the company is also at a threat of intense competition from
rivals. Polaris does face the threat of intense competition in all product
lines including from competitors who have greater financial and marketing
resources (Henry, 2016). The fierce competition is a threat falling under the
cultural factors as the failure of competing effectively against competitors
could negatively impact the business and operating results of Polaris.
The
overall state of the economy: the microenvironmental factor involved in this
threat is cultural. When the economy tends to be struggling, the recreational
vehicle industry is normally affected heavily than many industries because of
high prices of products and also the need for customers with the disposable
income.
The
high price of oil and gasoline worldwide: the high price of oil and gasoline
fall under the international factor as the high prices of oil do affect the
sales of Polaris. Since consumers know that using these vehicles will be more
expensive, they are likely to deter from buying these vehicles.
Opportunities
Joint venture: the microenvironmental factor
involved in this opportunity is environmental. Polaris need to ensure that it
focus on developing joint ventures with leading manufacturer of vehicles so
that it can be able to meet the diverse vehicle needs of emerging markets.
International
expansion: the international expansion falls under the international factors.
The fastest growing segments include Europe, Africa, and the Middle East and
Polaris should focus on expanding to these markets (Polaris Industries 2017).
Expand
to European market: this is an international factor and expanding to European
markets, which are quickly growing economies, will provide Polaris with an
opportunity of increasing sales and target a larger market.
Strategic
acquisition: the strategic acquisition does fall under the demographic factor.
When Polaris considers a strategic acquisition, it will have the opportunity of
entering new markets and also developing new products that focus on a
particular population. The opportunity will enable a growth potential for
Polaris for future business.
Critical success
factors
The improved productivity and better
cost controls are some of the key success factors. The company is very quick to
claim that the operations are a competitive advantage. While focusing on
ensuring better operations, Polaris has managed to improve its productivity in
the past years. Research and development are also another success factor.
Polaris has always focused on investing in research and development and has
allocated a lot of money dedicated to this area. Innovation is also a critical
success factor (Henry, 2016). Polaris continues introducing more innovation
with its products. As a worldwide leader in the off-road vehicles, Polaris
continues announcing new product enhancement, new models, and ground-breaking
technology that is aimed at revolutionizing the riding experience of consumers.
Polaris has a relentless pursuit of innovation, and it shows commitment to
building the best road solutions for its customers. As a result of this,
Polaris has managed to attract and even maintain customers with the high
quality of products that the company develops. Loyalty is also a success factor
for Polaris. Those customers who purchase a vehicle in the company and are
pleased with it tend to have a higher tendency of purchasing from the company.
By understanding the importance of loyalty, Polaris has always focused on
keeping customers happy all through their services.
Internal analysis
Strengths
High-quality
products: Polaris tends to have a wide range of high-quality products. The
production of high-quality products is as a result of the innovative capability
of the company. Therefore, Polaris can satisfy even the most demanding
customer.
A
good relationship with customers: Polaris has managed to develop a good
relationship with its customers which usually start even before the customer
can make a purchase (Henry, 2016). Polaris normally ensures that its customers
have the chance of trying the vehicle and that relationship does continue even
after the sales.
Vertical
integration: the strategy that the company uses is a major strength. The vertical
integration strategy that Polaris implements, tends to be a great opportunity
for the future. It does enable for greater decision-making capacity and also
helps in monitoring the quality of the products. Thus, investment in research
and development has enabled Polaris to ensure that it offers quality products.
Strong
balance sheet and cash flow: Polaris does have a strong balance sheet. When
considering the financial position of the company, it means that it can be able
to deliver the expected growth; thus, it has a competitive advantage.
Weaknesses
Competition:
competition tends to be a major weakness for Polaris. Competition in the
industry continues to increase as new technology, and also innovative products
are being developed daily. Therefore, it is important that Polaris should focus
so much attention on innovation so as to ensure that it does not lag behind as
other companies move forward.
Product
spread out: Polaris tend to be very spread out in regards to the product lines
that the company offers such that it does hurt profitability. Thus, it will be
good if Polaris should consider focusing on just few product lines instead of
every subcategory of recreational vehicles.
Dependence
on the US market: the dependence on the US market is a weakness in over 70%of
revenue usually comes from USA sales (Henry, 2016). Despite the company having
international markets, most of its revenue is derived from the US. The high
market concentration in the USA can be a big disadvantage for Polaris in the
long-run.
Poor
command hierarchy: when looking at the management and leadership of Polaris, it
tends to be unclear who is in the hierarchy of command and the control of the
US operations. The lack of a clear hierarchy of command tends to be a major
disadvantage to the company.
Competitive advantage
The strong brand of Polaris that command
pricing power and a large distribution channel has helped to build its
advantageous position. Competitive advantage tends to be an essential in
acquiring the corporate image to achieving the organizational objectives.
Polaris Industries is fast growing, innovative, and a global organization.
Innovation tends to be a competitive advantage for this company. Since the
beginning of Polaris, it has always been a company that takes high-quality
tailor-made products and innovation into account, and it provides solutions.
Polaris tends to be a leader in standards in the market and the industry
because it does show significant important to innovation. With continued
innovation, Polaris has managed to diversify its product offering and also
managed to stay ahead of the competition.
Strategic
recommendations
Based on the above discussion, it is
clear that an opportunity available for the company is international expansion.
While considering the international expansion, Polaris should consider the
legal and political environment. It is essential to know the rules one should
play when doing business outside the home country. Thus, Polaris should ensure
that the political environment is stable since small changes in government and
politics can cause a change in national priorities; thus, effective the
business (Henry, 2016). While observing the expansion, it is also important to
know the policies that encourage foreign direct investment and international
trade. For instance, the government can try to shorten the paperwork and
bureaucratic approvals in setting up a new company. Such a move will be
beneficial to Polaris in saving time and cost for entering a new market.
Polaris has been using joint ventures as
a strategy to enter the new market. However, it would be good if the company
considered the use of franchise. Franchising is growing in emerging countries,
and it is a method that does permit a quick entry and penetration of market
with rapid development and expansion of stores. Franchising is characterized
with least financial and time environment, and it is low risk. Since Polaris is
a high-value brand that has a great marketing exposure, this approach will
enable the company to rapidly increase its brand awareness in other countries
(Henry, 2016). Polaris needs to understand that it is easy to expand in a new
market when you have local distributors who you can count on to help understand
the market better. When Polaris uses this strategy to enter a new market, it
will be able to achieve higher control of the market. That includes having a
good understanding of the market trends and also be able to form a close
relationship with dealers that can offer important feedback regarding the local
market.
Reference
The
Street Ratings (2017). Polaris Industries
Inc.
Polaris
Industries (2017). About Polaris,
Henry,
B (2016). Polaris Industries Inc
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