AN IN-DEPTH CASE ANALYSIS OF UNITED TECHNOLOGIES CORPORATION 13
Running head: AN IN-DEPTH CASE ANALYSIS OF UNITED TECHNOLOGIES CORPORATION
An in-depth Case Analysis of United Technologies Corporation
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Introduction
United Technologies Corporation (UTC) is primarily one of the largest industrial conglomerates that specializes in the designing, manufacturing as well as the provision of a broad range of the services as well as the products inclusive of elevators, helicopter, and Jet engines as well as air conditioners. The organization is confined to the aerospace and defense business sector disseminating and executing its operations in North America, the United States as well as the entire universe (Barsky et al., 1999). United Aircraft Corporation, established in 1934 has turned out to be the origin of the global Aerospace industry. In 1975, the company changed to UTC. The company is committed to ensuring there is an improvisation of various sustainable solutions to enable individuals to stay in a productive, safe and comfortable through passion, science as well as engineering. Its headquarters are located in Farmington, Connecticut, the USA with about 200,000 employees by early 2017.
UTC Mission Statement
The Missions statement of UTC states that “UTC is committed to ensuring continuous improvement. We undertake our operations in an extensive research programme in identifying technologies and innovations to enable us to improve the quality of our products relentlessly.” By the end of the financial year 2016 December, UTC revenue was $57.4 Billion. UTC value statement is embodying of positive behaviors that as the capacity of building trust and demonstrating integrity. UTC owners its commitments, ensure open communication and holds accountable by itself. Through the operation of the codes, UTC sustains and creates value for the stakeholders.
United Technologies Corporation (UTC) Porters Five Forces Analysis
Within his revolutionary article, Michael Porter observed five forces having a significant impact on the profitability of the firm in its industry. These five forces presently the business world include the following:
Bargaining power of the Buyers
Bargaining power of the suppliers
Rivalry within the players in existence
The threat from Substitute products
The threats on New Entrants
Threats of New Entrants
New entrants in defense and Aerospace products and services brings about new ways and innovation in undertaking things and putting adamant pressure of the UTC technologies through costs reduction, lower pricing strategy, provision of novel value propositions to the customers. UTC has the objective of managing this entire challenges to come up with effective barriers for safeguarding its competitive edge.
The Bargaining power of the Suppliers
Almost the entire companies in the defense or aerospace products and services industry purchase their raw materials from typical suppliers. In a dominant position, the suppliers have the capacity of significantly decreasing the UTC margins embedded in the market. Outstanding suppliers within the industrial goods sector make use of their power for negation in extracting higher prices from the defense or aerospace products and service firms within the arena (Barsky et al., 1999). The final impact of the significantly high bargaining power of the supplier it that it lowers the entire profitability of the services and products of the Aerospace/defense.
Bargaining power of the Buyers
It is often depicted that buyers in most of the times often appear to be a far much hard lot. They usually yearn to purchase the offers available and with very minimal prices. This exerts ideal pressure as far as UTC is concerned in the long run. The more powerful and smaller the customer base is of UTC, the higher the customers’ bargaining power and their higher capacity of seeking increased offers and discounts (Barsky et al., 1999).
Threats of the Substitute Products or Services
When a novel service or product comes in contact with the same needs of a typical customer in various ways, there would often be the suffering of the industry profitability. For instance, google drive and Dropbox serve as substitutes to storage hardware drives. The threat of the service or product which is a substitute is significantly high if it provides a value proposition that is entirely distinct from the current offering of the industry.
Rivalry among the competitors in existence
In the case of rivalry within the players in existence in a given industry is intense, the ultimately the industry will drive the prices down and reduce the overall profitability of the industry at large. UTC executes its operation within a very much competitive Defence or aerospace products and services industry. This competition hardly takes toll of the overall long term profitability of the company.
Organizational Strategy
UTC strategic approach regarding competitive advantages through diversification of its businesses ventures. To minimize stiff competition and always gain a competitive advantage, UTC has diversified into other business ventures including acquisition, private new venture as well as the joint venture. After the Purchase of the Rockwell Collins, the firm has split into three distinct entities: Otis, United’s Aerospace Operations and carrier (Bensinger & Pilkington, 1983). This separation has opened up the ways for opportunities to concentrate on a different business venture that minimizing competitive to a greater range and this consequently seem to significantly improve the values of the stakeholders.
Additionally, UTC has strived to embrace an appraisal of the operating system of the company entitled Achieving Competitive Excellence (ACE). Basically as researched by Boritz, and No (2009), UTC is depicted to be highly effective as far corporate entity is concerned which leverages its superior innovative process and technology efficiencies methodologically to establish a sustainable value and as a result present and gain a competitive advantage within the market place. In light of this, UTC relentlessly brings common standards and purpose of its various divisions through systematic and faithful implementation of the ACE operating system (Popper, 1998).
United Technologies Corporation SWOT Analysis
Strengths
Breakthrough R& D: Research and development has been one of the fundamental points of differentiation as far as UTC is concerned when compared it its various competitors. Whitney and Pure came up with a turbofan engine which highly revolutionized the aerospace industry. It significantly decreases pollution of the environment by about 50% and the consumption of fuel by 15% (Boritz & No, 2009). In the segment about the construction of systems, much of the industry’s concentration is on automation. With a research spending of more than $3,9 billion and tow dedicated on research and development in the US making UTC appear outstanding all its competitors.
Other strengths regarding UTC is that it is among the largest as wees and the strongest player in the industry, it has an outstanding international presence, with customers and facilities in the entire world. It has the most effective acquisition strategies, and consequently, its management is in support of very visionary and innovative leaders (Popper, 1998).
- b) Weaknesses
UTC is primarily depended only on the economic growth of the other countries meaning that lack of economic growth of these countries would ultimately stagnate the growth of the company
The company has an inherently very high depth which could inherently downgrade its ratings
- c) Opportunities
There exist typical opportunities that the company can venture into in inorganic growth alternatives
There exist opportunities regarding the growth of commercial aviation, urbanization and middle class
There exist inherent opportunities in defense expenditure of different countries
d): Threats
Exchange rates may highly be impacted negatively as a result of the fluctuations of the currencies
Defense and import regulatory policies by governments in distinct countries. This might significantly limit the exports that UTC can undertake in some nations, in other countries, defense regulations will potentially affect the UTC aerospace wing.
Operational strategy of UTC
UTC was serving as a leader as far as the aerospace community is concerned. It has been depicted as being one of the most recognized final awardees of the Small Businesses One Acquisition Solution for the Integrated Servicers (OASIS) as an operational programme for the firm. As a result, UTC is amongst the privileged small business ventures appointed to take part in the 4 of the entire seven OASIS task order pools (Boritz & No, 2009). The inclusion of UTC in the four OASIS contracts, the diverse and unique portfolio of UTC’s capabilities has garnered the government a wide customer operational base.
The core competencies as far as UTC are concerned to include:
Materials and manufacturing.
Directed Speed Energy
Management and planning support
Educational outreach and academic research collaboration
Meeting visual and management graphics
Aerospace systems such as propulsion and power, manned and unmanned air vehicles, sustainment and energy control.
UTC Business Model
UTC has split into four different business units with various distinct military and commercial products. These for fundamental units include UTC aerospace systems, Pratt and Whitney, OTIS Elevator Company and the UTC Climate Controls and Security which compete in different industry with an objective of providing high quality products such as HVAC, aerospace systems, aircraft engines as well as fire and security systems to both the private customers and the government (Bensinger & Pilkington, 1983). A detailed UTC business model is presented in appendix three.
UTC Global Operational Strategy
As far as the UTC global operational strategy is concerned, it is undeniable that UTC provides an in-depth and wide global coverage regarding the strategies and the performance of the worldwide leader in defense and Security Company. The company operates in key geographical in conjunction with comprehensive analysis regarding the growth strategy as well as financial performance. Key performance indicators as far as the global strategy is concerned to include sales, contracts and order backlog. As a result of the comprehensive service portfolio, the company has been in a position t0o continually maintain a far much competitive position (Barsky et al., 1999).
Through offering a range of different high-quality products and services, they have helped significantly in serving as a broad range of customers and thus gaining a far much competitive advantage over its peers in India (Boritz & No, 2009). The firm delivers sophisticated and far much advanced technological services as well as products in the construction of systems in conjunction with aerospace industries as well as aftermarket service solutions.
Amongst the global recommendation strategies that I can recommend is increased mergers and acquisition in India to enable the organization to enhance as well as expand its market share in India. Consequently, a substantial increase in arms sales will significantly improve the market share of the firm. Therefore, there is a need to increase the arms sales across all the four units of the firm.
UTC Demand Forecast
There exists stiff competition as far as the UTC business units are concerned. The airline industry is anticipated to grow by 5% every year for the next two decades. This is based on the market liberalization as well as the expanding global economy in India. Consequently, developing countries are experiencing growth particularly within their middle-class segments resulting in increased travel (Barsky et al., 1999). This change in demography as one of the macroeconomic trend has led to the development of additional aircraft as well as aftermarket services demand. Furthermore, trends confined to urbanization provides significant insights for outstanding growth HVAC industries and elevator opportunities which are depicted to record a 3% growth within the next decade. Consequently, enhanced military expenditure in the US and the whole world has showcased encouraging growth projections for the entire UTC business units in the subsequent years.
Figure 1: UTC Compound Annual Growth Rate (CAGR)
Forecast Accuracy
Based on the UTC prevalence in India, the MAPE forecast provides a detailed account of the market share in India. MAPE provides a number of the different alternatives and avenues that UTC can employ to ensure that they gain a competitive market in India and consequently gain a higher market share than any other market. Therefore, it is recommended that UTC should come up with detailed global, national and organizational strategic plans to ensure they have a larger market share in India. It has been showcased that, this could be basically through acquisitions and mergers as well as ensuring that it delivers high-quality services and products to the prevalent customers in India.
References
Boritz, J. E., & No, W. G. (2009). Assurance on XBRL-related documents: The case of United Technologies Corporation. Journal of Information Systems, 23(2), 49-78.
Barsky, N. P., Hussein, M. E., & Jablonsky, S. F. (1999). Shareholder and stakeholder value in corporate downsizing–the case of United Technologies Corporation. Accounting, Auditing & Accountability Journal, 12(5), 583-604.
Bensinger, A., & Pilkington, C. F. (1983). An alternative method in the treatment of alcoholism: the United Technologies Corporation day treatment program. Journal of occupational medicine.: official publication of the Industrial Medical Association, 25(4), 300-303.
Popper, S. W. (1998). Critical Technologies.
Appendices
Appendix A: Michaels Porters Five Forces Framework
Appendix B: The SWOT Analysis for United Technologies Corporation
Appendix C: UTC Business Model