Resources, Strategy, Value Chain of the Freigtag Company - Research Paper Example

? FREIGTAG Introduction The FREITAG Company is a world-renowned firm, which prides its success, on the bags that it produces. The company has grown through leaps and bounds to become a pioneer in the world of design. The strategy implemented by the firm stems from their ideology of creating products that define the element of quality, yet they must depict style and be a durable product for their customers. The company embraces this philosophy, and it has resulted in the world embracing the company. (Gomez, 2008) Resources FREITAG is situated in Switzerland, and it has grown, establishing several branches on a global scale as an initiative and symbol of the firm’s growth and development. The company prides its products in high regard, which is mirrored in the price of the bags. The company targets the high-end market, but it has not stopped the market from spending money on the pricy bags. However, the nature of the products is designed as durable bags, which is incorporated in the pricing. The company bases their pricing on the factor that the purchase of a bag will imply that the customer will not have to buy another bag for a long time. The durability of the bags is attributed to the resources used in the product development (Kotter, 2002). The organization uses old truck tarpaulins, car seat belts, and the inner tubes of bicycle tires to develop their expensive bags. The tools used are ideal for the company because they are cheap material since they are on low demand and they can be used in developing the bags, which are durable. The design of the bags is based on the bag design for the bike couriers, which they use for making deliveries. The design is suited to the general market because it has a casual look, and the bag can be used for various occasions, as well as in practical sense. The design is based on attracting keen observers of style and design. Along with the design, the bags are proven durable, waterproof, repairable, easy to use, and practical. The designs are unique and each bag is hand-made, making each bag personally tailored for its buyer (Richard, 2001). Strategy The strategy implemented by FREITAG is focused on using cost-cutting measures to increase or maximize profits. From the inception of the company, Marcus and Daniel did not borrow money, which was a main strategy of reducing any costs of the company that may affect the productivity in the long run. Even with the aim of creating FREITAG into an international company, the brothers focused on using their funds purchase material that will increase efficiency in the firm’s production strategies (Kleiman, 2010). The plan has served the brothers well over the years, it has fostered the development, and success of the organization, and they have managed to succeed in turning the company into an international company. The prime factors that have influenced the company’s strategy are three vital factors: quality, sustainability, and functionality. The three factors are integrated in the bag design as a measure of ensuring the firm’s success in the market. The brothers also ensured that the bags would be special, tough, and useful (Mitcham, 2005). It pushed the firm into using strong and durable material in the production of the bags, but still using materials that would keep the firm’s costs to a minimum. It is the reason why the organization will use recycled materials, which include pieces of airbags to make labels, and Velcro to produce quality bags at a low cost of production (COP). The organization focuses on in-house funding (revenue) as the means of developing the company’s brand and expansion strategies. The company’s main core is centered in Europe, where it employs 88 employees. 76 are located in it is headquarter in Zurich, four operate in Hamburg, and Berlin and Cologne have three employees each. The company may have over 350 designated selling points worldwide; however, they are not employed directly by the company, which is a measure that ensures the firm maintains a low COP (Gomez, 2008). The selling points are based on ensuring that the firm is able to sell their bags, but they use established stores and other selling agents as their main tools for selling the products. It is a cheaper measure in comparison to running and operating a store worldwide. The limited number of employees ensures that the company can maintain a close relation with its employees and ensure that the company secrets and ideas are not leaked or passed on to competitors, which can harm FREITAG (affect revenue). Value Chain The value chain is established on prioritizing the production department. With the 76 employees utilized in Switzerland, their focus is to produce bags that are in line with the company’s goals and objectives. The other employees located in Europe are tasked with the sales, marketing and distribution functions of the FREIGTAG, where they search and assess the regions in which the company will export its products to distributors. The value chain is structured to focus on the main aspects of a firm, which are sales, distribution, marketing, and production. The brothers utilize an ideal strategy of including their bag designs in magazines as their advertising strategy. It is ideal because magazines are popular among women, who put an emphasis on style and design, which are factors that the firm utilizes in product development. It is a cheaper measure of advertising in comparison using billboards and television advertisements (Kotter, 2002). It is more likely to reach a larger customer base, because magazines are spread or distributed on a global scale, therefore more people are likely to read magazines with the company’s products, in contrast to having advertisements in one country. Competitive Advantage In relation to the firm’s competitive environment, FREITAG focuses on reducing costs in order to compete with its competitors, as well as narrowing their market to the high end or high income-earning individuals. The strategy is centered on the nature of high income earners are willing to spend more on quality products, and they are likely to buy more than one bag regardless of the price (Ahire, 1997). High-income earners have a high tendency of spending a lot of money on quality products, which is influenced by their large amount of disposable income. The selected market segment niche has a limited number of competitors, which suites FREITAG and their mode of operation. As a measure of reducing the effects or impact of the firm’s competitors, FREITAG is constantly growing its volume of production as a measure of increasing its reach to its customers. As of 2009, the organization had increased its annual bag production to 202,000, which is a symbol of growing compared to 1993, where the company had only produced 40 bags. The increase in the annual bag production means that the firm can look into increasing its market and venturing into other market segments. It can serve to increase the firm’s market and probable market sales. However, it implies that the firm will compete with new competition. With the company’s reputation, FREITAG may have some ease in entering the new market segments. Another strategy is to increase the number of sales in the market segment, by looking into new regions where the firm can attract the same market segment with an increase in the sales/revenue. However, the brothers are seeking a new CEO, with the aim of providing the right direction for the firm. The main problem for the brothers is finding the right CEO, who will share the same vision as the brothers, and will provide the ideal strategies that will improve the company. This implies that the brothers will require taking some time before deciding on the ideal CEO for their company (Gomez, 2008). Another factor that the brothers will have to consider is the character of the new CEO. Having the right attitude and the right character, which will illustrate the right image for the firm, is a crucial factor because the right image can influence the market. Another essential factor that the brothers will require in their new CEO will be an idealistic individual, which is part-and-parcel of what firm is about. Because the organization is structured on ideas on design, the CEO must have the idealistic nature that will help in determining the best designs that the firm can utilize in growing its market (Ahire, 1997). Creativity is an essential aspect that the brothers will need to consider in selecting their new CEO. Combining the factors will be crucial for the brothers, and it may play a crucial role in the rise, stagnation, or fall of FREITAG. It illustrates the difficulty that the brothers face in establishing the ideal CEO for their company. It will not be aided by the growing pressure for success for companies in the demanding nature of the design industry. It will be difficult tasks for the brothers, who value FREITAG more than any other individuals. Therefore, the process of selecting a new CEO may take a long time, but it should not be rushed because of the demands of the position in the company. References Gomez-Mejia, et. al., 2008. Management: People, Performance, Change, (3rd Ed.), New York: Wiley. Kotter, John P. Dan S., 2002. The Heart of Change. Boston: Harvard Business School Publishing. Kleiman, Lawrence S., 2010. "Management and executive development.”Reference for Business: Encyclopedia of Business. Ahire, S. L., 1997. Management Science- Total Quality Management interfaces an integrative framework. New York. Prentice Hall. Mitcham. C., 2005. Management, Encyclopedia of science, technology and ethics. Washington: Macmillan. Richard. G., 2001. Telecommunications Management: Industry Structures and Planning Strategies. New Jersey. Harvard. Read More