Human Resource Assignment question on Managing the induction process

Executive Summary

The following information has been extracted from the full New product business plan and is intended as a preliminary briefing for STAR Industries senior and middle management. Detailed analysis and justifications can be found in the full business plan.

Project Overview

STAR Industries is aiming to extend its reputation as Australia’s premiere manufacturer of quality doors and windows by expanding its range of products.

It is proposed that STAR Industries commence manufacture, distribution and retail of fixed and retractable aluminium awnings. These can be efficiently manufactured by a significant utilisation of existing infrastructure and with modest additional capital investment.

This expansion would be in three phases:

• Year One: production of a new range of awnings at our existing manufacturing facilities in Sydney and Perth — distribution and sales limited to NSW and WA
• Year Two: production increased and sales expanded to whole of Australia and NZ
• Year Three: expand sales into South-East Asia; possible production facility established in SE Asia.

The initial research indicates that there may be an opportunity to extend STAR Industries’ operation to South-East Asia, where residential and commercial construction is growing. The opportunity is greatest in the awnings area, where local companies target the budget end of the market. STAR’s quality range of products can aim at the higher end of the market and will compete successfully against other imported ranges from the USA and Europe.

Business description

The existing business of STAR Industries is the manufacture, wholesale and retail of quality windows and doors for residential and commercial premises. The company has been successfully competing in the higher-quality, higher-price market. Competition generally comes from either well-established national companies who produce quality product only as an add-on to a broader economy product range or from higher-priced overseas manufacturers of quality products.

Business concept

The proposed additional industry area is the manufacture, wholesale and retail of a range of awnings in both the commercial and residential markets. These would again be positioned as higher-quality, higher-priced products.

No national competitors in the awnings industry currently specialise in high quality product. The move into awnings is an opportunity to build on the reputation STAR Industries already has for a quality product. It will also provide the opportunity to sell additional product to the company’s window and door customers, as well as a new base of awning customers.

An emphasis on modern architectural design, the use of powder-coated aluminium and a select range of Sunscreen fabrics will establish the product as a desirable designer addition for the style-conscious.

Proposed products

Production will initially involve five awning styles, each able to be customised for length, depth, colour and fabric.

The awnings will be constructed with forged aluminium components. Forging the aluminium components is stronger than traditional die-casting or permanent mould castings used by competitors and will allow STAR to utilise existing technologies and processes. The frames will also be powder-coated in any of five standard colours, using existing processes. This, along with a range of fabric options, will result in a high-quality design product for fashion-conscious renovators and architects.

Financial overview

STAR is in a strong financial position coming off the back of three years of the highest levels of building activity seen in Australia and after having undergone a minor restructure of it’s production processes. The final figures for the last financial year are reproduced below (from STAR Annual Report).

STAR Consolidated Yearly Statement of Income (Unaudited — in $AU million

Start-up summaryThe proposed new product range will require significant set-up effort. While many of the manufacturing processes involved capitalise on existing in-house facilities such as powder coating, there will be a substantial requirement for tooling and machinery. In line with this, new staff are required in manufacturing and it is also proposed that a dedicated Product Manager for this product range be appointed in the Marketing division solely to this range of products.

Total Year One new product start-up expenses (in $AU thousands)

Total projected Year One income (in $AU thousands)

Sales revenue	600
Cost of sales	(1,475)
Year One Project income ($AU thousands)	(875)

Total Year Two new product expenses (in $AU thousands)

Legal	24
Marketing (inc. consultant)	300
Admin and utilities	70
Supplies	610
Labour	200
Sundry expenses	15
Total Year Two Project costs ($AU thousands)	1,219

Total projected Year Two income (in $AU thousands)

Sales revenue	1,900
Cost of sales	(1,219)
Year Two Project income ($AU thousands)	681

Financing

Since much of the future predicted growth of STAR Industries relies on the success of this project, a portion of STAR’s consolidated earnings from the past two years will be allocated directly to funding the first year of start-up and production. The project will be expected to break even at eighteen months and profits from that point will underwrite planning for the expansion into South-East Asia.

Estimated sales

As stated above, the project is expected to reach break-even point at eighteen months. This is reflected in the projected income statements above for Year Two. Initial estimates for sales are:

Year One — $600,000 (NSW and WA only)

Year Two — $1,900,000 (all of Australia)

Achieving these figures will be crucial to plans for expansion into SE Asia in Year Three.

Marketing

Competition

The new range of awnings will reinforce the STAR commitment to the creation of quality design. While all five styles would be priced higher than most existing competitive products, the price would be less than those of importer Euroawnings, which currently dominates the high-quality end of the awning market.

This market advantage is assisted by import tariffs on products from the USA and Europe. Our research indicates that import tariff levels are set to remain static for the next five years.

Positioning

Market positioning will be crucial to the success of the new range of awnings. Pricing for the new products will be in keeping with the use of higher-quality materials and workmanship.

The new range of awnings will be ‘flagship’ products for STAR. Awareness of STAR as a quality brand will be significantly increased as a result of the advertising exposure of the new awnings.

Strategies

While designed to be promoted alongside our existing products and also designed to take advantage of STAR’s current marketing strategies and promotional avenues, the new awnings call for more direct appeal to public tastes. This is in addition to STAR’s current promotional strategies which target architects and builders through wholesale outlets, trade press and special interest publications.

Increased public awareness for these new products and for STAR will flow from two main additional marketing efforts:

1. 30-second TV ads to be inserted in prime-time lifestyle programs
2. back-cover placement in designer and DIY renovation magazines such as ‘Inside-out’, ‘Our House’ and ‘Vogue Living’.

Project life cycle

The following represents the broad strategy to be adopted in the introduction of STAR’s new product range. Progress of Years Two and Three are conditional on the success of previous stages.

Year One: Start-up and initial distribution

The major project milestones in Year One are anticipated to be as follows:

• Appoint new Product Manager in Marketing division
• Tooling, training and testing at NSW and WA production facilities
• Grassroots marketing campaign notifying existing customers and vendors (including existing STAR showrooms) of the coming new product range
• Production begins
• Public marketing campaign begins in NSW on TV and in print — targeting urban areas
• First wave of orders delivered and installed
• Marketing efforts expand to regional centres
• Production increases to planned capacity
• Revision of production, delivery and installation performance levels
• Research market acceptance

• Negotiations begin for local partnerships with Asian distributors
• Exploration for production partners in SE Asia begins

Year Two: Nationwide distribution and two-plant manufacturing

• Revise and implement changes from performance review
• Grassroots marketing campaign goes nationwide
• Production expands in WA and NSW
• National public marketing campaign begins
• National sales and installations commence
• Profit point expected to be reached at eighteen months
• Review of management structures based on progress at eighteen months
• Partnerships with Asian producers and distributors finalised

Year Three: International distribution

• Production facilities established in SE Asia
• Production begins for Asian market start-up
• Promotional campaign begins in Bangkok and Singapore
• SE Asian sales commence
• Shipping of initial SE Asian orders
• Consolidation of Australian national sales
• STAR Industries new range of awnings successfully introduced
• Future efforts focused on growth in established markets.

Management

This project represents a major new initiative for STAR Industries and is in many ways a new line of business.

The existing management structure at STAR will be appropriate for overseeing the first part of this new project. This is due to the utilisation of existing resources with minimal new production and distribution infrastructure being required.

There will be some investment in new personnel — two part-time production workers, one new Production Supervisor and one dedicated Product Manager.

At eighteen months a review is scheduled which will address any changes or additions that may be necessary. This review will focus particularly on additional resources needed for the launch into Singapore and Bangkok.

SWOT analysis

The production of a new range of window awnings by STAR Industries represents a significant addition to our line of business. In many ways the fortunes of this project will dictate STAR’s own success over the next few years. What follows is a brief assessment of the internal and external forces affecting the success of this project.

Strengths (Internal to STAR):

• New range of awnings a major new product stream for STAR
• STAR in a strong financial position after three good years providing substantial start-up capital for the project
• Awnings integrate well with existing product range — windows and doors
• Production will mostly utilise existing plant and equipment.
• Existing sales networks to assist distribution
• Production and sales infrastructure fully operational
• Cross-promotion of window and door products packaged with awnings
• Proposed marketing strategy will reinforce STAR’s reputation for quality for all products as there will be additional public exposure through extensive product advertising

Weaknesses (Internal to STAR):

• Risk associated with new product investment
• Machine installation may disrupt existing production efforts
• Start-up financing introduces vulnerability to STAR’s overall margins
• Significant infrastructure investment may threaten overall profitability if product launch not successful
• Risk of overcapitalisation
• Expansion into SE Asian markets dependant on success of first stage of planned introduction
• STAR not known for its awnings in Australia
• STAR unknown in SE Asia
• Limited experience in international marketing (i.e. not only unknown in SE Asia but limited experience base in operating internationally)

Opportunities (External to STAR):

• Competing Australian-made products of lower quality
• Imported quality products more expensive due to tariff restrictions
• Tariff restrictions set to remain static for the next five years
• Continuing strong growth in the home-building sector including increased investor spending on ‘boutique’ developments
• High consumer spending levels on home renovations
• Increasing affluence within targeted SE Asian market, opening opportunities for consumer spending on housing
• ‘New brand’ effect in SE Asia

Threats (External to STAR):

• Competing Australian-made products of lower price
• Bust in housing markets if interest rates rise substantially
• Changes to tariff rates may favour international competitors (not likely)
• Competition with European and USA products at the quality end of the market
• Australian products don’t have the ‘cache’ of overseas brands
• Impact on STARS continuing viability i.e. its core business, if new ventures go badly wrong and create a continuous drain on finances (common scenario associated with international ventures/expansions – In our strategic plans should we have some contingency plans on what we will do, including timeframe statements for how long we will stay with the ventures, if they go belly up? – Lee)
• Impact of delays if STARS Remunerations and Benefits package fails to attract suitable applicants for new positions or if key personnel leave the organization (Linking into the issues in the Remuneration and benefits module – possibly another threat is internal remuneration and benefits relativity issues if the new international appointees receive a remuneration package far better than existing managers – Lee) 

Finally

This Executive Summary for the STAR Industries new window awnings product launch has shown that there is great opportunity for growth in the coming years. Along the way there are many challenges to face and the whole process will need to be closely supervised and realistically resourced.

The future of STAR Industries rests largely on the success of this project. Successful achievement of the goals set out above will mean that STAR has the opportunity to become a dominant force in the South-East Asian marketplace.

Assessment methods:

This assessment is broken up into four parts. Each part must be completed and submitted as evidence of competence.

• Task 1: Activity: Develop an HR Proposal
• Task 2: Activity: Develop Recruitment selection and induction policies, procedures and documents
• Task 3: Case Study: Managing Recruitment and selection processes
• Task 4: Project: Managing the induction process