Case Analysis: Tennant Company Essay

Lead-In/Key IssuesOver Tennant Companys (Tennant) 141 twelvemonth history, they arrest consistently remained a producer of floor- alter equipment and technologies emphasising their efforts in producing products for non-residential use. Since the saucily CEO Chris Killingstad has come to the company however, he has been dramatically changing Tennants value proposition with a broader emphasis encompassing chemical-free cleansing and former(a) technologies. This case shows Tennants move beyond traditional green efforts to modify environmentally-friendly performance at the heart of the companys focus, and whether this new focus provides enough benefit as a war-ridden advantage.The challenge now for Killingstad and Tennant is how to move forward into 2013 in terms of company focus and statement mainly the extent to which they should diversify. Should Tennant move into residential securities exertions with little units for consumers to use in-home? Should they impact to focus on the commercial side, investing instead in the market potential of their ec-H20 and irreversible electropoproportionn technologies? Or should they enter emerging markets with low-cost ersatzs to very increase their global exposure and propagate their vision of chemical-free cleaning? office staff AnalysisExternal AnalysisIn this section I leave alone use case information and provide an psychoanalysis of the commercial cleaning manufacturing. I am choosing to ignore the residential cleaning industry at this time as they begin only begun thinking about the consumer market at the time the case was written. alike, given the push by the majority of cleaning companies to go green it is important to look at the built-in cleaning industry rather than just the ecologically-friendly niche in regularize to assess the level of Tennants competitive advantage relative to the industry as a whole. As aforementioned, there has been a general swerve towards green alternatives in the 21 st century, across a large grade of industries. More specifically in the commercial cleaning industry it was revealed that consumers in demand(p) more environmentally-friendly solutions, as long as there was no give to price and performance. This ties in with the industry opportunities in the Tennant SWOT analysis (appendix 2) as the innovational products from Tennant give them the advantage over chemical-only cleaning companies.Before I analyze Porters tailfin forces with respect to Tennant, we must recognize what life cycle stage the commercial cleaning industry is shortly at. Since meshs for Tennant have been rising, and the industry as a whole is say to have risen to 5 billion, I can conclude the industry is still in the growth stage. outright it is important to look at how the development of new engineering science has impacted Porters five forces, most specifically the bar comeing power of buyers and the threat of substitute products. Since the entrance of their dis ruptive technologies they have greatly reduced the risk of these two forces specifically as these types of products are non easily available elsewhere. It is through these technologies they have created a new, unique selling proposition that has become a competitive advantage for Tennant.Internal AnalysisMoving away from the external environment in the cleaning industry, I will now shift worry to Tennants key strengths (and their underlying typesetters cases) as healthful as an analysis of financial information to assess their profitability and efficiency. The main source of Tennants relative strength in the industry comes from their innovative and patented technologies (see vermiform process 2). Firm-specific strengths are resources that can become means competencies in the case of Tennant they have already become a primary strategical advantage. Now as technological strengths are quite often a by-product of well-structured R&D within a firm, it is therefore crucial to look at in this case. Most of their initial innovative success can be attributed to the Advanced Product Development group, which although was only allocated 10% of the R&D budget they developed the most meaning(a) technologies between 2002 and 2006, namely their desist and ReadySpace technologies. Following the success of their ec-H2O technology, they decided to further develop its platform outside(a) of the corporate culture of Tennant and created the subsidiary Orbio Technologies Group.It was through this subsidiary that Tennant developed the split-stream technology and irreversible electroporation, both successful innovations. In all, it can be think that the creation of an entrepreneurial subsidiary was a successful management move, and combine with well coordinated R&D it stick outed Tennant to develop their core competency. Now it is also important to note where their strengths and weaknesses lie with respect to their financial selective information and corresponding ratio analysis.Tennants main concerns lay in tether specific ratios run cash stream ratio, their operating profit margin, and their solvency ratio (see Appendix 1). First their operating cash flow ratio is well on a lower floor one indicating they have not generated enough cash flow during the year to pay off their short-term liabilities. Second their operating profit margin is only 6.10% and 5.76% for the past two years respectively, indicating they are not generating an ideal amount of EBIT per sales dollar earned. And third their solvency ratio is below the healthy threshold of 20% (10.67% and 9.67% for the past two years respectively) importee they have less of an ability to fulfill debt obligations and have a heightened inattention risk.Now they are a little stronger in some areas their veritable ratio is above a two which is ideal for most firms. Also they do have some operating leverage (although not very some(prenominal) above a one means it is low). There is a significant gap between their gross margin and operating profit margin, indicating they are spending a large amount of their revenue on operating expenses. This is to be expected with a high schoolly R&D intensifier company like Tennant, as well as the need for high selling expenses required to differentiate from the rest of the cleaning companies.Strategic preferencesAlternative 1My first alternative is for Tennant Company to move into the residential, consumer market with smaller Orbio-E handheld units. In this proposed alternative they should stay away from licensing and keep drudgery within the company. This alternative simply provides a variation of their core competency, innovative technologies, and therefore does not stray far from their already established strategic strengths.Alternative 2The second alternative I would recommend would be the proposed base-of-the-pyramid (BOP) model in emerging markets. As suggested by the case would allow them to identify areas to improve in their l egacy markets by creating low-cost products for low-income consumers in developing countries. Furthermore, this action could potentially catapult them to industry-leader status by winning their green initiative to the next level. This very likely would also cause an increase in their goodwill.Alternative 3The final alternative I will provide with this analysis is for Tennant to continue current operations. They would focus their resources on developing their existing customer relationships with their tried and tested product line. This alternative is taking the less risky approach, by not pursuing chemical-free cleaning too quickly and waiting to assess where the industry is after a given period of time. This will help mitigate potentially pestiferous effects on their existing customer base who do not feel ready to make the transition to chemical-free cleaning.Strategic RecommendationI would suggest Tennant Company move forward with my second proposed alternative, of the BOP cou rse model venturing into emerging markets. It does carry with it more risk, and would require them to take an in-depth analytical look at the profitability of that option. However the potential benefits outweigh the perceived risk in this example for Tennant. Not only will they gain valuable insight into reducing costs associated with their production by developing a low-cost line, but this option is the most synergistic with their core vision. Chris Killingstad even states We owe it to the world to grow and expand as much as we can, and this simply cannot be accomplished by avoiding emerging markets in developing countries. All-in-all, with their unique technology and highly green initiatives, Tennant Company is well-positioned for act success in the cleaning industry.