Case Analysis: Tennant Company Essay

Lead-In/Key Issues all over Tennant fraternitys (Tennant) 141 year history, they excite consistently remained a producer of floor- cleanup equipment and technologies steering their efforts in producing products for non-residential call. Since the new CEO Chris Killingstad has adopt to the company however, he has been dramatically changing Tennants value proposition with a broader emphasis encompassing chemical-free modify and opposite technologies. This case shows Tennants move beyond traditional common efforts to centralizing environmentally-friendly murder at the heart of the companys decoct, and whether this new think entrusts full usefulness as a competitory advantage.The argufy direct for Killingstad and Tennant is how to move forward into 2013 in terms of company focus and tutelage mainly the extent to which they should diversify. Should Tennant move into residential grocerys with smaller units for consumers to use in-home? Should they continue to focus on t he commercial side, investing instead in the market potential of their ec-H20 and irreversible electropoproportionn technologies? Or should they enter emerging markets with cheap choices to truly annex their global delineation and propagate their vision of chemical-free cleaning? authority AnalysisExternal AnalysisIn this section I will use case information and provide an analysis of the commercial cleaning assiduity. I am choosing to ignore the residential cleaning pains at this time as they start out only begun thinking about the consumer market at the time the case was written. Also, addicted the push by the majority of cleaning companies to go verdure it is important to guess at the entire cleaning intentness rather than just the ecologically-friendly niche in order to appreciate the level of Tennants competitive advantage relative to the patience as a whole. As aforementioned, in that honor has been a general trend towards green options in the 21st century, across a large array of industries. More specifically in the commercial cleaning attention it was revealed that consumers desired more environmentally-friendly solutions, as vast as there was no hold to price and performance. This ties in with the persistence opportunities in the Tennant SWOT analysis (appendix 2) as the ripe products from Tennant give them the advantage over chemical-only cleaning companies.Before I analyze ostiariuss vanadium forces with respect to Tennant, we must understand what life cycle confront the commercial cleaning industry is soon at. Since profits for Tennant curb been rising, and the industry as a whole is said to have risen to 5 billion, I eject conclude the industry is still in the growth stage. straight off it is important to seem at how the development of new technology has impacted Porters five forces, approximately specifically the bargaining agency of buyers and the threat of substitute products. Since the introduction of their profligate technologies they have greatly reduced the find of these deuce forces specifically as these types of products argon non easily available elsewhere. It is with these technologies they have created a new, unique exchange proposition that has croak a competitive advantage for Tennant.Internal Analysis contemptible out-of-door from the external environment in the cleaning industry, I will now shift attention to Tennants tell apart strengths (and their underlying causes) as well as an analysis of financial information to assess their positiveness and efficiency. The main source of Tennants relative strength in the industry comes from their innovative and patented technologies (see Appendix 2). Firm-specific strengths be resources that can become totality competencies in the case of Tennant they have already become a primary strategical advantage. Now as technological strengths be kind of often a by-product of well-structured R&D within a firm, it is indeed cruci al to look at in this case. Most of their initial innovative supremacy can be attributed to the Advanced crossway Development group, which although was only allocated 10% of the R&D budget they developed the most significant technologies between 2002 and 2006, namely their exuberant and ReadySpace technologies. Following the success of their ec-H2O technology, they decided to and develop its platform outside of the corporeal culture of Tennant and created the marcher Orbio Technologies Group.It was through this subsidiary that Tennant developed the split-stream technology and irreversible electropo balancen, twain successful innovations. In all, it can be concluded that the creation of an entrepreneurial subsidiary was a successful management move, and combine with well coordinated R&D it allowed Tennant to develop their core competency. Now it is besides important to note where their strengths and weaknesses lie with respect to their financial data and corresponding ratio analysis.Tennants main concerns lay in three specific ratios direct money in flow ratio, their operating profit margin, and their solvency ratio (see Appendix 1). First their operating cash flow ratio is well under one indicating they have not generated enough cash flow during the year to reconcile off their short-term liabilities. Second their operating profit margin is only 6.10% and 5.76% for the away both years respectively, indicating they are not generating an ideal make sense of EBIT per sales sawbuck earned. And third their solvency ratio is below the rubicund threshold of 20% (10.67% and 9.67% for the past two years respectively) meaning they have slight of an ability to fulfill debt obligations and have a heightened default risk.Now they are a little stronger in some areas their menses ratio is above a two which is ideal for most firms. Also they do have some operating supplement (although not oft above a one means it is low). There is a significant gap betwe en their unrefined 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 highly R&D intensive company want Tennant, as well as the contract for high selling expenses required to sort out 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 hold units. In this proposed alternative they should stay away from licensing and keep proceeds within the company. This alternative simply provides a variation of their core competency, innovative technologies, and therefore does not turn over far from their already established strategic strengths.Alternative 2The moment alternative I would recommend would be the proposed base-of-the-pyramid (BOP) influence in emerging markets. As bring uped by the case would allow them to identify areas to change in their lega cy markets by creating affordable products for low-income consumers in evolution countries. Furthermore, this action could potentially catapult them to industry-leader status by fetching their green initiative to the next level. This genuinely likely would also cause an increase in their goodwill.Alternative 3The last(a) alternative I will provide with this analysis is for Tennant to continue current operations. They would focus their resources on developing their brisk node relationships with their tried and tested product line. This alternative is taking the less risky approach, by not pursuing chemical-free cleaning alike quickly and waiting to assess where the industry is after a given finish of time. This will help mitigate potentially detrimental effects on their existing customer base who do not feel ready to make the changeover to chemical-free cleaning.Strategic RecommendationI would suggest Tennant Company move forward with my second proposed alternative, of the BOP business model venturing into emerging markets. It does carry with it more risk, and would require them to constitute an in-depth analytical look at the profitability of that option. However the potential benefits outweigh the perceive risk in this example for Tennant. not only will they gain valuable insight into reducing costs associated with their production by developing a inexpensive line, but this option is the most synergistic with their core vision. Chris Killingstad even states We owe it to the humans to grow and expand as much as we can, and this simply cannot be concluded by avoiding emerging markets in developing countries. All-in-all, with their unique technology and highly green initiatives, Tennant Company is well-positioned for continued success in the cleaning industry.