Harvard Case - Tennant Company: Innovating Within and Beyond the Core
"Tennant Company: Innovating Within and Beyond the Core" Harvard business case study is written by Lynda M. Applegate, Toby Stuart, James Weber. It deals with the challenges in the field of Entrepreneurship. The case study is 26 page(s) long and it was first published on : Jun 7, 2010
At Fern Fort University, we recommend Tennant Company pursue a multi-pronged growth strategy focused on expanding into new markets through strategic acquisitions and organic growth while leveraging its core competencies in technology and analytics to drive innovation and profitability. This strategy will involve a combination of organic growth through product development and market expansion alongside inorganic growth through strategic acquisitions of companies with complementary technologies and market reach. This approach will enable Tennant to capitalize on emerging trends in environmental sustainability, automation, and data-driven decision making while maintaining its focus on customer value and operational efficiency.
2. Background
Tennant Company is a global leader in the cleaning equipment industry, known for its innovative products and strong customer relationships. The company faces challenges in maintaining its competitive edge in a rapidly evolving market characterized by technological advancements, increasing competition, and growing demand for sustainable solutions. The case study focuses on Tennant?s strategic decision-making process as it explores opportunities to expand beyond its core business and capitalize on emerging trends.
The main protagonists of the case study are:
- Chris Hengel, CEO of Tennant Company, who is tasked with leading the company?s strategic direction and navigating the complexities of the changing market.
- The Tennant Company leadership team, who are responsible for developing and executing the company?s growth strategy.
- The Tennant Company Board of Directors, who provide oversight and guidance on the company?s strategic decisions.
3. Analysis of the Case Study
To analyze Tennant?s situation, we can apply a Porter?s Five Forces framework to understand the competitive landscape and a SWOT analysis to identify internal strengths and weaknesses and external opportunities and threats.
Porter?s Five Forces:
- Threat of new entrants: Moderate. The cleaning equipment industry has relatively high barriers to entry due to the need for significant capital investment and technical expertise. However, the industry is attracting new entrants, particularly from emerging markets.
- Bargaining power of buyers: Moderate. Customers have some bargaining power due to the availability of alternative cleaning equipment providers. However, Tennant?s strong brand reputation and customer loyalty provide some protection from price pressure.
- Bargaining power of suppliers: Low. Tennant has a diverse supplier base, reducing its dependence on any single supplier.
- Threat of substitute products: Moderate. The cleaning equipment industry is facing increasing competition from alternative cleaning methods, such as robotic cleaning systems and environmentally friendly cleaning products.
- Competitive rivalry: High. The cleaning equipment industry is highly competitive, with several established players vying for market share.
SWOT Analysis:
Strengths:
- Strong brand reputation and customer loyalty
- Expertise in cleaning equipment design and manufacturing
- Strong global presence
- Commitment to innovation and technology
- Experienced leadership team
Weaknesses:
- Dependence on a mature market with limited growth potential
- Limited presence in emerging markets
- Potential for cost pressures from competition
- Challenges in adapting to rapidly evolving technologies
Opportunities:
- Growing demand for sustainable cleaning solutions
- Expansion into new markets, particularly in emerging economies
- Development of new technologies, such as robotics and artificial intelligence
- Partnerships with technology companies to enhance product offerings
Threats:
- Increasing competition from new entrants and established players
- Economic downturns and fluctuations in demand
- Technological disruptions and the emergence of new cleaning methods
- Regulatory changes and environmental concerns
4. Recommendations
Tennant should pursue a multi-pronged growth strategy focused on:
1. Strategic Acquisitions:
- Target companies: Companies with complementary technologies, strong market positions in emerging markets, or expertise in sustainable cleaning solutions.
- Acquisition strategy: Focus on companies with strong management teams, a proven track record of profitability, and a clear synergy with Tennant?s existing operations.
- Financing: Utilize a combination of debt and equity financing, ensuring a manageable debt burden and maintaining a healthy capital structure.
2. Organic Growth:
- Product development: Invest in research and development to create innovative products that meet the evolving needs of customers, focusing on sustainability, automation, and data-driven solutions.
- Market expansion: Expand into new markets, particularly in emerging economies with high growth potential. This can be achieved through direct sales, partnerships, or joint ventures.
- Customer engagement: Strengthen customer relationships through personalized service, tailored solutions, and proactive communication.
3. Leveraging Technology and Analytics:
- Data-driven decision making: Utilize data analytics to optimize operations, improve customer service, and develop new products and services.
- Automation: Invest in automation technologies to improve efficiency, reduce costs, and enhance customer satisfaction.
- Internet of Things (IoT): Explore the potential of IoT technology to connect cleaning equipment, gather real-time data, and optimize performance.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Tennant?s core competencies in cleaning equipment design, manufacturing, and customer service are leveraged to drive organic growth and guide strategic acquisitions.
- External customers and internal clients: The recommendations focus on meeting the evolving needs of customers by developing innovative products, expanding into new markets, and providing personalized service.
- Competitors: The recommendations aim to maintain a competitive edge by leveraging technology, expanding into new markets, and acquiring companies with complementary strengths.
- Attractiveness ? quantitative measures: The recommendations are expected to generate positive returns on investment (ROI) by increasing revenue, improving profitability, and enhancing shareholder value.
- Assumptions: The recommendations are based on assumptions about the continued growth of the cleaning equipment market, the increasing demand for sustainable solutions, and the availability of suitable acquisition targets.
6. Conclusion
Tennant Company has a significant opportunity to expand its business and capitalize on emerging trends by pursuing a strategic growth plan that combines organic growth with strategic acquisitions. By leveraging its core competencies, embracing technological advancements, and focusing on customer value, Tennant can position itself for continued success in the evolving cleaning equipment market.
7. Discussion
Other alternatives not selected include:
- Focusing solely on organic growth: This approach may be too slow to capitalize on emerging market opportunities and could result in losing market share to competitors.
- Acquiring a large, established competitor: This approach could be expensive and risky, and it may not be feasible given Tennant?s current financial position.
- Divesting non-core businesses: This approach could free up resources for growth initiatives but could also alienate customers and erode brand value.
Risks and Key Assumptions:
- Economic downturn: A significant economic downturn could negatively impact demand for cleaning equipment, reducing Tennant?s revenue and profitability.
- Technological disruption: The emergence of new cleaning technologies could disrupt the market and make Tennant?s existing products obsolete.
- Integration challenges: Successful integration of acquired companies is crucial for realizing the benefits of acquisitions.
- Competition: Tennant?s competitors may also pursue similar growth strategies, intensifying competition and making it more challenging to achieve market leadership.
8. Next Steps
To implement the recommendations, Tennant should:
- Develop a detailed strategic plan: This plan should outline the specific goals, timelines, and resources required for each growth initiative.
- Conduct due diligence on potential acquisition targets: This will ensure that acquisitions are strategically aligned with Tennant?s goals and that the acquired companies are financially sound.
- Invest in research and development: This will enable Tennant to develop innovative products and maintain its competitive edge.
- Expand into new markets: This can be achieved through direct sales, partnerships, or joint ventures.
- Monitor progress and adjust the strategy as needed: Regular monitoring and evaluation will ensure that the growth strategy remains aligned with the changing market environment.
By taking these steps, Tennant can position itself for continued success in the evolving cleaning equipment market and achieve its long-term growth objectives.
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Case Description
Tennant, a leading producer of floor cleaning equipment, must determine the business model to use for its new chemical free cleaning technology. In 2005, Tennant Company had developed an innovative, environmentally friendly, cleaning technology that could potentially revolutionize cleaning. Historically, Tennant was a producer of floor and carpet washing machines for industrial and commercial markets. Over time, it became clear that the technology had applications far beyond Tennant's core markets. In mid-2009, the company set up a new venture to develop the technology's promise. In 2010 this venture was wholly owned by Tennant and run by a Tennant manager. The case examines the decisions the CEO and new venture head must make to best structure and position the venture to succeed.
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