Strategic growth of a company


Strategic Growth

Strategic Growth of a company determines what would be the economic conditions of an organization or company over the next year or more and company's future plans of development in the long term. There are two terms regarding this which should not be confused. One of them is the business plan that is about setting up objectives for the short or mid-term and for a particular product, program or service while the other is a strategic plan, the focus of which is on the entire organisation and setting up goals for the mid to long term and defining the steps necessary to achieve them. Another way of describing the strategic growth is the SWOT-Analysis. SWOT is an acronym for strengths, weaknesses, opportunities and threats. But companies use SWOT-Analysis in the businesses in which they have identified their goals and objectives.

The Company

During the first three quarters of year 2008, the company as a whole showed strong favourable conditions including Sandvik Tooling but the growth was influenced negatively in the fourth quarter by world's economic downturn. Sandvik-Coromant has obtained 49% shares of a US-based Precorp Inc. Precorp is the manufacturer and supplier of polycrystalline diamond and cemented-carbide products. And the company is about to reach an agreement for the acquisition of a UK-based BTA Heller Drilling system - the producers of tools for deep hole drilling. BTA are experts in deep hole drilling products and offers brazed tools deeper than 200mm in complex materials. This acquisition will secure a long-term stable ownership of BTA and will offer opportunities for investments in R & D (research and development) sector and production of deep hole drilling tools. In addition Sandvik Coromant will be able to strengthen the expertise within deep hole drilling tools. BTA Drilling systems will be incorporated with Sandvik business areas and become a global deep hole drilling application centre of Sandvik Coromant. This acquisition will be the company's long term strategy for a favourable growth. With this acquisition, Sandvik will be able to develop the business of deep hole drilling and strengthens its partnerships with aerospace, primary metal and energy sector.

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In the fourth quarter of 2008, financial crisis really affected the global economy, including China, but the company still obtained significant development in China. Despite the global recession, China is still the best-performing market in the downturn, and the country is expected to be one of the company's largest markets. It generated global sales of $12 billion and profits of $1.35 billion in 2008. Sandvik Coromant has maintained an annual revenue growth of 20% within the past 10 years. China is currently the fourth-largest market for Sandvik Coromant and Italy is the third-largest market which is nowadays in a deep recession. So it will be a good chance for China to be at the third-largest market for Sandvik Coromant. Sandvik Coromant has continued to invest in the factory for cemented-carbide tools in Langfang (China) and a new manufacturing unit has been established in Wuxi, close to Shanghai where strong business relationships are showing positive results. The company is considering the current economic recession as an opportunity to gain more market shares globally and mainly china. The main customers of Sandvik Coromant include companies from aerospace, automotive and engineering industries. The Aerospace industry is one of Sandvik Cormorant's focus areas. As Sandvik Coromant is introducing its latest aerospace technology in China, the demand of processes, tools and materials within the aerospace industry would increase dramatically. There would be strong growth opportunities in the sectors including aerospace and energy because these two sectors are probably the ones which will continue to grow even in the recession period.

In Asia, the company is setting up a steel plant under the division of Sandvik tooling in Pune, India. This new plant would be utilizing an investment of $9.725 million. Sandvik Asia Limited is a subsidiary of $8 billion of the Swedish Group Sandvik. Currently the company is producing 250000 units of taps but with this new plant, the company would be manufacturing one million units per year. The production from the plant would be about 80% of exports and the rest would be for domestic market. In this way, this new plant would not only support Asia but also would make India a global producer. In India, the division is producing taps under the brand name Titex. Furthermore, the company is investing heavily in India. e.g., In south of Mumbai, India, a new plant is recently constructed for the recovery of cemented-carbide. Since cemented-carbide products are the most important products within Sandvik tooling, so it's worth investing in recycling of cemented-carbide products. With this new plant cemented-carbide scrap is converted into powder which can then be used as power production in Sandvik's plants all over the world. The demand for threading tools has also increased in the past few years and the growth has remained profitable so Sandvik Coromant is expected to invest in plant manufacturing threading tools in Pune, India. The production for threading tools would be for the entire market.

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Sandvik Coromant is one of the world's leading producers of cemented-carbide rolls from hot rolling mills for narrow an long parts of products. From the reports of past five years the demand for the production of cemented-carbide rolls from the plant at Stockholm has sharply increased. In order to meet the extensive demand, the company is implementing a massive investment in Stockholm plant. The overall growth and demand of cemented carbide products in the recent years has averaged 3-4%. e.g., "The world market for metal-cutting tools is valued at approximately SEK 140 billion, of which sales of cemented-carbide tools account for about SEK 110 billion and high-speed steel tools for about SEK 30 billion". Moreover the invoiced sales of Sandvik tooling are exceeding $3.00 billion which is the largest of Sandvik's three main businesses. i.e., Mining and construction, Materials.

Beside company's development plans in Asian region, Sandvik's cut production in Europe and North America due to shrinking demand in developed countries hit hard by the downturn in world's economy. e.g., In EU region, the growth declined for the full year 2008 till second quarter of 2009. Due to this fact, Sandvik in Sweden had to announce a termination notice covering a total of 490 employees.