Competencies and Competitive Advantage

Our vision for Baldwin Corporation is that its main focus will be on differentiation within three segments. Specifically, we see the company offering unique, high quality products with superior design, to the High End, Traditional, and Low End segments. Significant contribution margins as well as strong R&D will be key precursors to success. Additionally, a strong focus on promotion, customer needs, and human resources will ensure Baldwin Corporation continues to grow and prosper both now and in the future. The top three competencies that I believe are necessary to effectively execute our vision and strategy for Baldwin Corporation are product design, product awareness, and human resources. In such a rapidly changing industry, product design and re-design is extremely important. In order to achieve a competency in product design, we need to focus on the company’s R&D. This department needs to invent and revise products that appeal to our customers’ changing needs. To do this, we need to decide how we will position each of our products, so that a product's performance and size is where customers want it to be for each segment. In deciding on a product’s performance and size, we need to take into account the drift rate for every segment, as every year customers want increased performance and decreased size. We also need to look at the ideal spot. By carefully analyzing the drift rate and ideal spot, we need to decide where we want to position each of our products so that they will appeal to customers, but also be differentiated from our competitors’ offerings in the same segment. We want each of our products to be positioned slightly off of the ideal spot. After looking at the segment centers and taking into account the ideal spot offset (segment center + ideal spot offset), our goal will be to have a slightly higher performance and a slightly lower size than the calculation indicates. Our decisions regarding each product’s performance and size will help us develop a competency in product design. This competency will, in turn, lead to a competitive advantage based on differentiation. An excellent design that meets customer needs and wants will set our products apart from those offered by our competitors. In order to execute our vision and strategy, we will also require a competency in product awareness. Awareness is an extremely important competency. There is little point investing time and money into R&D and re-designing products to appeal to customers, if no one knows the product exists! Since one of our competencies is product design, we want to ensure that customers look at our products. We are certain that once people see our product, they will love it! Excellent product awareness will help us get the most out of our investment in R&D. Awareness is also crucial because the more people that know about our product, the more products we will sell, and the higher our profits will be. Decisions made in the Marketing department will affect a product’s awareness, as awareness is built over time using the product’s promotion budget. We have decided to invest a total of $2,000,000 in promotion for each product every year. By continually investing in promotion, we will ensure that potential customers are aware of our products, and that that they will continue to be aware of our products over a long period of time. For each product, this budget will be allocated among the five media categories available. When deciding how much of each product’s promotion budget to allocate to each media category, we will look at the potential reach for each segment, which varies for each of the different media categories. Although we will allocate some of each product’s promotion budget to Page 2 each media category, we will put the most into the types of advertising that will have the greatest impact and reach the greatest number of people. Allocating various amounts to all the media categories will ensure that we reach the greatest number of people possible. We will also take into account the diminishing returns. We will not invest more than the recommended maximum amount in each media category for each product, since any investment beyond that amount will not lead to substantial increased awareness. Ultimately making these decisions for Promotion will lead to excellent awareness. We will strive for 100% awareness for each of our products. A strong competency in awareness will produce a competitive advantage built upon differentiation. A high level of awareness means that a greater number of customers will know our products exist. This will give our company a competitive advantage because the high awareness will generate high demand and ultimately higher sales. People often gravitate towards products they are familiar with, which means investing so heavily in promotion and advertising will make our products fresh in people’s minds, and make them more likely to purchase our product instead of a competitor's product. We believe a competency in human resources will also help us achieve our vision for the company. We intend to attract high-calibre, well-qualified employees. Recruitment and training will be key. Both will be costly endeavours ($5,000 per worker to recruit top employees, and between $1,300 and $1,600 per worker each year in training costs, based on 65 to 80 hours of training @ $20 per hour). However, an investment in recruitment and training should result in higher productivity and lower staff turnover – both of which will ultimately translate into higher profits for the company. Ultimately, we want our employees to be happy working for our company so that our Turnover Rate will be very low (no more than 5%). To this end, we will endeavour to offer employees a desirable work environment with fair compensation, reasonable hours, and additional incentives such as benefits and pension plans. We will also commit to promoting from within so that we don't lose good employees to competing companies. We believe that this combination of initiatives will help foster company loyalty, and result in employees who take pride in their work and really want to do a good job. We intend to employ only the Needed Complement of workers (including fill-in workers for training) in order to avoid overtime pay and the associated employee turnover. However, we will also be cognisant of upcoming automation improvements that may reduce the number of workers required. In those instances, we will hire less than the Needed Complement in the preceding year (and supplement with overtime as needed) in order to avoid unnecessary Recruitment Costs when new employees are hired ($5,000 per employee) and unnecessary Separation Costs ($5,000 per employee) when those same employees are no longer needed the next year. We will commit to providing full-time jobs for all employees so that they can take advantage of our employee benefits program. The competitive advantage of investing in human resources is, of course, lower costs. Baldwin is a company that recognizes the value of employees and knows that investing in them now will save the company money in the long run. This is an area that many of Baldwin's competitors often undervalue or overlook. In summary, we believe our company vision will be successfully achieved if we concentrate on three core competencies – product design, product awareness, and human resources. Focussing on these three competencies should help us achieve a distinct competitive advantage in the areas of differentiation, high demand, and lower costs. These competitive advantages will ultimately facilitate Baldwin Corporation's journey to becoming the highly respected and profitable company we refer to in our vision.