Harvard Case Selkirk Group

Harvard Case Selkirk Group

Name 1 Summary of Case

Established in 1883 by Robert Selkirk in Victoria, Selkirk Brick has been a successful, family-owned clay brick and paver business in Australia for over 100 years (p.2). Several major acquisitions between 1982 and 1992 helped to diversify and modernize the company, and by the late 1980s, Selkirk had established a solid reputation in its home market (p.3-4). Export activity to Asia began in 1992 and quickly grew, in terms of both the number of Asian countries penetrated and the total number of units sold (p.6). In 1997, Selkirk also signed a five-year distribution agreement with a leading Japanese building products company (p.7); however, by late 1998, the future of the Asian economy seemed questionable (p.10). With this in mind, how could Bernie Segrave, the man responsible for overseeing all export matters (p.8), venture to develop an effective strategy and organizational structure for Selkirks Asian export business?

Answers to Questions

2.1. Question 1: What is the current competitive strategy and position, both in Australia and across Asia? At the company level, in both Australia and across Asia, Selkirk currently exercises the differentiation strategy. Selkirk made three major acquisitions that helped broaden their scope of activity as well as develop a three-stage modernization program that resulted in world-class product quality outcomes (p.4). From 1982 to 1986, Selkirks modernization program gave them technical superiority and cost efficiency in the marketplace (p.4). In 1982, because of its strong market presence in north-western Victoria, Selkirk acquired Phillips Bricks and Pottery Pty Ld (p.3). And in 1992, Selkirk acquired Shepparton Bricks and Pavers, which brought them into the booming concrete paver business. With their last acquisition of Stratblox, Selkirk could then be seen as a more broadly diversified company in the clay and concrete brick and paver business (p.5). At the industry level, Selkirks position would be more of a differentiation focus strategy. Not only is Selkirk known for high quality products, but also in recent years, increasingly, clay bricks and pavers were being used as architectural features rather than simply as a construction material, (p.2), thus narrowing the scope of the companys business. Selkirks differentiation focus strategy is more focused in Asia than in Australia. Selkirk restricted their scope of business in Asia by exporting through distributor agents in which the margins charged locally were up to the agents and other overseas parties interested in purchasing directly and offering their local services were inevitably referred back to the nearest agent (p.6). 2.2. Question 2: How well does the current export organization and approach support the existing strategy for Asia? Selkirks current approach is to concentrate on exporting products to Asia and to use existing production capacity to meet market needs (p.11). Exports, which account for about 10 percent of total sales volume, are an important sales outlet for the company (p.6). Selkirks existing policy of appointing distributor agents throughout various Asian countries helps to increase sales, but does not lead to useful information about the Asian market for clay bricks and

Harvard Case Selkirk Group

pavers (p.6). This indicates a deficit in the companys ability to organize information collection in order to better gauge this new markets needs, preferences, and opportunities. The 1997 Japanese sales agreement also increased Selkirks total sales while allowing the company to maintain its brand and trademark for its range of products in Japan (p.8). In the state of the current Asian economy, such practices make sense; however, other strategies (such as licensing agreements, joint venture operations, and subsidiaries) may be more effective for Selkirk upon the recovery of the Asian economy (p.11). Selkirks generous allocation of both funding and manpower to export matters, especially in terms of building strong relationships between company representatives and Asian counterparts, is very important (p.8-9). The company realizes that maintaining harmonious and productive relationships is important to the Asian culture, and that such should also be a core company value when considering the future success of Asian export business. 2.3. Question 3: What are the companys current strategic options in Asia? Make an assessment. Selkirks current strategic options are signing licensing agreements, creating subsidiaries, making joint-ventures, or dedicating one plant in Australia to meet the needs of solely the Asian marketplace. Dedicating a plant in Australia would only change their degree of their exportation, thus resulting in the same or worse situation due to the economic situation in Asia. Examining a porter 5 forces analysis, substitutes exist, and in the recovery of the Asian marketplace, the new plant technology will result in an attractive industry in which local competition will arise. A licensing agreement with an Asian company would serve as an advantage because it finances the companys expansion without having to construct and start up its own facilities. However, a disadvantage would be that the companys differentiated image of high quality might not be carried over. A wholly owned subsidiarys advantage is Selkirks ability to have total control over it. A disadvantage would be the financial cost of building a wholly owned subsidiary and the high financial risks if the Asian economy does not recover. Due to the fact that Selkirk doesnt know much about the Asian marketplace, the companys best option would be a joint venture. 2.4. Question 4: What recommendations would you make to Bernie Segrave? As Managing Director, Bernie Segrave is responsible for overseeing all export matters for Selkirk (p.8). A rapid increase of brick and paver utilization throughout Asia raises concerns about how to modify the export strategy of Selkirks products. In order to enter the Asian market and obtain a large market share, it may be good for Selkirk to take part in joint venture operations throughout Asia. Selkirks success in Asia thus far has been due to both the amount of time spent building and maintaining personal relationships with Asian agents, as well as the companys ability to deliver products required on the basis of technical excellence and service (p.9). Such a business venture would greatly benefit Selkirk, as the company does not know much about the Asian market and these could potentially reduce risks associated with the relative uncertainty of the future of the Asian economy. Joint venture operations in Asia could also help match Selkirks penetration to that of the local competition and maintain close relations between Australian and Asian management and employees.