CASE 8: SURVIVAL AIDS LTD
Nicholas Steven was
born March 20, 1949 in Purley, Surrey, England.
In 1960, he moved with family to
Cumbria where he attended Austin Friars School in Carlisle. There he obtained a GCE level in Chemistry,
‘A’ levels in Physics and Chemistry and ‘O’ levels in eight subjects. He also took an active part in the local Army
Cadet Force and in 1967, he entered Sandhurst, the Royal Military Academy,
where he participated in judo, shooting and other sports.
In early 1970, he was
posted to Germany for a tour as a line troop Commander before entering the
Royal Military College of Science in October.
Nick was awarded a degree in Applied Science in 1973 and went on to
command a VHP radio troop in the United Kingdom. He also instructed at the School of signals
and served as Adjutant of the 16th
Signal Regiment in West Germany.
In 1979, Nick Steven
decided to leave the military and begin another career. He considered number of different
occupational options and finally decided to start his own business. Throughout
his military career, Nick had been involved in survival training but had found
that good quality survival equipment was practically unobtainable. His plan, therefore was to build a company
specializing in equipment and training for survival against the elements.
By 1987, Survival Aids
Ltd was a successful, thriving business.
Survival Aids Ltd had grown from a business with a single product to one
with nearly 1400 different items which generated £2.5million in revenue (turnover)
in 1987. Nick had been more successful
than even he had anticipated, but he now had to decide what to do with his
company.
Nick could sell
Survival Aids Ltd to another larger company; he could acquire one or more of
his smaller competitors, he could place more emphasis on retail outlets, he could
expand his product line, he could expand into other countries or he could do nothing and let his company continue
its steady growth. Survival Aids was a
company built around one product. The initial product was a compact,
lightweight Survival Ration Pack suitable for use by those who indulge in
outdoor pursuits. The scaled emergency
pack contained specially selected high energy foods and drinks as well as solid
fuel, matches, instructions and other necessities. The kit contained 14 different items scaled
in an airtight aluminum container which could be used to hold hot food and
drinks. The Survival Ration Pack was
introduced in August 1979 at a press reception in London which featured a wide
food buffet. The pack was originally
sold through camping and outdoor leisure shops to both civilians and military
personnel.
When Nick began his
search for a suitable building to serve as both the office and production area
for his new company, he established several criteria to guide him. First, he wanted a location in a rural area
that would provide jobs for people who might otherwise have difficulty finding
work. Second, he believed that his
Company should be located in an area which offered many outdoor
activities. Third, he needed a facility
that was inexpensive. As a first step,
he selected a building owned by a relative but hoped later to find a building
large enough for his current and future needs.
Being located near the
Lake District, Survival Aids was able to sell its product to outdoor retailers
while Nick continued his search for a more ideal location. Using the same initial criteria, Nick found a
suitable building which would be suitable for several years since it contained
two buildings, one which could be used for offices and a larger building that
could be used for production and warehousing.
Although Survival
Ration Packs were selling well, Nick realized that his company could not grow
with only one product. Therefore, he
decided to expand his product line and he began to selling some ten products by
mail order. In 1980, Survival Aids
published its first type-written mail order catalogue which featured some 68
items and contained one black and white photograph. In that same year, the company exhibited for
the first time at the national camping and outdoor leisure trade show. Nick did not want all of Survival Aids sales
to be form mail order customers, so he began wholesaling to dealers while
looking out for new markets. Nick
realized that soldiers were becoming an increasingly important customer group;
therefore, in 1983, the company exhibited the Rhine Army Summer Show. Survival Aids was the first company to
develop alternative professional equipment which soldiers could purchase by
mail. In 1984, the Survival Aids Liaison
team conducted a series of survival lectures and equipment briefings around the
United Kingdom, culminating with Nick’s presentation to 1200 survival
enthusiasts in Watford Town Hall.
Catalogue sales and other selling efforts were successful and Survival
Aids enjoyed a turnover in excess of one million pounds for the first time in
1985.
Survival Aids now sells
approximately 1400 different products to outdoor enthusiast. Most products are made to the company’s
specifications and in some cases, the company has exclusive rights to other
manufacturer’s products. Products that
do not sell well are usually dropped from the catalogue and new ones are added.
In 1982, Nick decided
to begin a survival training school which would teach outdoor enthusiasts basic
survival skills and would provide some exposure for the company. Initially, Survival Aids Ltd would offer 20
courses a year to teach the following skills; expedition training, survival,
combat survival, executive development and civil defence. Nick estimated that the survival school would
eventually generate revenue of about one hundred thousand pounds per year.
There were other benefits to be derived from the school. First, Survival Aids employees could be
exposed to outdoor activities. Second,
the school could provide facilities for R & D. Third, students would be potential customers
for the Company’s products. Finally, the
school would be good advertising.
From a business with no
personnel and no structure, Survival Aids has grown to a company employing 35
people which has a fairly well developed organizational structure. The company provides very comfortable working
conditions, the management style was participative and the employees were paid
well. In addition to above, average
wages, all employees participated in a profit-sharing plan. Nick decided to set
aside in perpetuity 15 percent of pre-tax profits for workers incentive. Employees would receive a percentage of that
lump sum based on their personal performance.
Nick has even considered letting his managers buy stock in the company,
because he believes that all employees should share in the success of the
company.
The majority of sales
of Survival Aids products come from mail order customers. The heaviest selling season is from September
to March when the company averages about 150 orders per week. Nick experts mail order to continue to be an
important source of sales because he believes that its advantages outweigh the
disadvantages. Furthermore, Nick
realized that Survival Aids would need to utilize more than one selling
technique if it were to reach the most potential customers. In February 1986, the first Survival Shop, a retail
outlet for Survival Aids products was opened. This shop was quite profitable,
especially during the summer weeks when many tourists visited the Lake
District, the home base of Survival Aids Ltd.
To further test the
profitability of retail outlets, Nick opened a shop in major London train
station in 1987. Early indications are that the shop will be profitable,
leading Nick and his managers to contemplate opening additional shops in London
and other parts of the country. Nick had
also tried some other selling techniques with varying degrees of success. The
company tried contract sales, but very little continuity was obtained from this
method of selling. Nick identified the
following problems associated with contract selling: Survival Aids does not
manufacture products; contract business is not repetitive; it is time consuming
and one of a kind orders do not fit into Survival Aids system. While contract selling would be continued, it
would receive very little budget support.
The company now sells through mail order, contract sales and retail
shops and it continues to wholesale its products to independent company shops.
On the basis of
competition, there are several companies which sell items similar to those
offered by Survival Aids, but no single company has a product line as complete
as Survival Aids. Companies that
competed do so on the basis of price rather than on quality or service. Nick was aware of a few companies which could
expand their product lines to compete with Survival aids. However, he was confident that good service
and high-quality products will keep Survival Aids ahead of the competition.
The target market for
Survival Aids was primarily military personnel and people, primarily males
interested in any outdoor activity. To
attract this market, Survival Aids relies mainly on its catalogues. However, it does use other advertising media.
Survival Aids Ltd has
been successful and profitable since its founding. The company’s sales have nearly doubled each
of the past five years with 1987 sales reaching 2.5 million pounds and 1988
sales expected to be approximately 3.5 million pounds. The products sold by Survival Aids are of the
highest quality; management and staff were very capable and no competitors
posed a serious threat to the company.
Although the company has been successful in the past, Nick was not sure
that it will continue to grow without some changes. There were several options being considered
to make survival Aids even move dominant in its market.
Questions:
1. Define
Survival Aids organizational mission and philosophy
2. Outline
the cycle of events in making strategic decision for survival Aids Ltd.
3. Describe
at least four areas in which Survival Aids Ltd. should perform environmental
scanning.
4. Outline
the areas that Survival Aids should analyze in performing its internal
organizational analysis.
5. Present
questions that must be answered in assessing the Survival Aids product
position.
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