Daktronic case Essay
Read Daktronics (F): Weathering the Recession Positioned for a Bright Future (Taylor et al.) found in your casepack and and use only the information found therein to answer the questions.
1. Assess Dak’s external and internal environments by:
Performing a PEST+LE analysis with 4-5 examples of each dimension Completing a 5-forces analysis to assess the competitive landscape
In the U.S. the billboard segment of the industry was governed by federal, state, and local regulations. Anticipated were regulations on “light pollution,” reflecting concerns of businesses and residents in the area where large or multi-screen installations were placed. Other concerns that would probably be addressed with future regulations included electronic media’s potential for distracting drivers.
Dak expanded the businesses to other countries, many different markets across the world have different set of regulations that are either relaxed or are either stringent.
The economic recession that began in 2008 continued to hamper the U.S. economy in 2010. The global recession was affecting many nations.
Although Dak held the largest market share in the industry, more and more aggressive and big companies are entering the market, like Samsung and Mitsubishi.
When Dak made investment in other countries, exchange rate of different currencies is a problem to consider.
Social factors are now impacting all industries, almost all the other countries are facing aging problems, poverty. People with different age in different countries may have different preferences to Dak’s product. Like in China, although digital display is popular in Shanghai or Beijing, but in some developing areas, people have no money to pay for that.
Like case said, what used to cost $3 million and last two years now costs $750,000 and lasts 10 years. That’s why you have the proliferation of signs at high school events. Innovation is the life of technological company. With more competitors in the market, customers knew more about the product, Dak should keep on investing on R&D so that it can produce advanced products to attract customers.
For the extreme digital displays, it will cost a lot of energy to make them work normally. It is a worldly problem to save energy. And as mentioned above, light pollution is also a problem for people who live close to those displays.
The Employment Law include work time, minimum wage rate and so on. And the firm should follow the health and safety regulations. For the products, consumer protection is also a problem for Dak to consider
1.Competition in the industry
Although Daktronics was estimated to have 80 percent of the digital market in mid-2008, but more and more competitors entered the industry, they shared a lot of sales of Daktronics.
2. Potential of new entrants into industry
With the development of technology, more and more firms are entering the market, it is impossible for Dar to occupy the most share of the market.
3. Power of suppliers
Dak focused on a limited number of suppliers because the company had developed relationships that assured quality control or because the supplier company customized the materials for the company’s applications.This strategy may bring some problems to Dak, the competitors can follow the firm can save cost to find suppliers
4. Power of customers
The onset of the recession revised expectations about demand for outdoor and display advertising and, as a result, estimates of demand declined for digital signage to $7.1B (7.1 percent) in 2008 with another decline to $6.3B (11.6 percent) in 2009. The power of customers are growing.
5. Threat of substitute products
It seems no other substitute products unless Dak can keep on R&D.
2. Identify their key:
Space and Facilities. Dak had a total of 64,000 sq. ft. of facilities in Brookings and approximately 1.1M sq. ft. of manufacturing space located in South Dakota, Minnesota, and New York.Besides that, the company also began a limited amount of manufacturing in 90,000 sq. ft. of leased facilities located near Shanghai, China.
Dak has a long history in the digital signage industry and has a large market share. When people need to purchase the product or service, the brand of Dak will make the company have more chances than competitors.
2). Human Resource
Dak’s employee body reached 100 in 1979, 500 in 1993, 900 in 2006, and 3000 in 2008. And The company’s senior executives had over 200 years of combined experience in the electronic display industry.
3). Managerial resource
Dak had initiated a “lean” manufacturing program in 2007. It was intended to focus the company on what customers actually wanted and were willing to pay for. The lean program in manufacturing was reducing costs as well as the time from order receipt to delivery and thus accelerating cash flow. In North America, Dak’s direct sales staff sold the entire range of the company’s standard products and substantially all of the large video display systems directly to customers or the individuals or companies that influenced the customer’s decisions. For smaller commercial applications, generally standard products, Dak relied primarily on its resellers or independent sales representatives.
High quality employment and experienced executives ensure the employees be competitive
Compound of direct sales and resellers accommodate to different customers
Lean program and other methods to reduce costs
Spaces and Facilities ensure the products of Dak can be produced normally to meet the need of market Research & Development
About 4% of annual revenues was invested into R&D, innovation will make Dak be competitive
3. Create a SWOT analysis to provide a strategic picture showing their internal and external factors What are the most critical internal strengths they have? How did you determine this? What are the most critical external factors they face? Why?
The most critical internal strengths they have is good reputation in this industry. There is no obvious advantage to the competitors. For the customers, reputation is a easy way to buy guaranteed quality. But when people know there are no difference, they may want to try new product.
The most critical external factor is new competitors, like Samsung and Mitsubishi. They have good reputation in other area, it may help them to attract people to buy their products.
4. If you were Dak’s management’s advisor, what would you counsel them to do in order to weather a recession and the various external factors you’ve identified? Not only Dak need to face recession, the competitors are also need to face it. For Dak, the company should keep the good quality when facing competitors, so it need to keep invest on R&D. Use the good reputation to attract new customers in new market, like South America. The exiting facilities and lean program will help the company to save money compared to new entries, and cut off unprofitable business. At the same time, Dak maybe make some acquisitions, especially the former suppliers, so that can control cost than before.