Case anaylysis6

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Company: Munden Enterprises

Size: Small

Industry: Electrical Equipment

Business Activity: Wholesale and retail trade

Type of Entity: Private Company

Number of Employees: Fewer than 25

Country: Canada

Headquarters: Wolfville Nova Scotia

Yearly Revenue: $1 million to $25 million

Gender: Male

Subject: Finance

Keywords:

Issue

Tony_Munden_Issue_1B: Can you describe an important issue that you had to resolve?

Recently an opportunity was presented to my company to enter a new business segment � industrial lighting. The opportunity is not without risk. In order to make a decision I thought it would be a good idea to perform a scenario analysis. My challenge is create a number of realistic scenarios.

Cause

Tony_Munden_Cause_1B: What caused the issue and why was it important?

This is important because the main business segment that we serve, cable and wiring, has been in a downturn since 2008. An opportunity has arisen to enter the lighting market in Atlantic Canada. The third largest manufacturer in the United States, a company that is not a major player in Canada has approached us to take on their line of light products. The overall all value of this market, which is part of the larger Atlantic Canadian electrical supply market, is roughly $120 million. We think we can capture 10% market share in five years' time but would need to hire talent to do so and it would cost us $150,000 per year. Interestingly, commission in this market is roughly 15% of gross sales. There is an important risk. At the moment in the cable and wire business segment, none of our products really cause concern for clients as they are store shelf commodities. A line of specialized lighting products would be a problem however as carrying them might cause us to lose as much as 10% of our annual gross sales in the cable and wire segment because of possible clients aligned with our competitors. Further, the sales cycle for lighting is 3 to 18 months, so we do not expect to generate any revenues in the first 12 months of the operation.

Tony_Munden_Q1: Can you tell me a little bit about yourself and your career path to date?

My name is Tony Munden. I am the president of Munden Enterprises Limited, located in Wolfville, Nova Scotia. I graduated in 1985 from Acadia with a BBA. Once I finished university I took a personality profile and one of the things that came back, was that my strength would be in industrial sales, so I went into industrial sales, started with a company can G&D Batteries in 1986, and then in 1987 after two years with G&D, went into the electrical industry with a company called Phillips Cables. I worked with Phillips Cables for about seven years, spent my time in Atlantic Canada and Halifax, and then took a career path into marketing as a product manager in 1990, and moved to Toronto. In 1993 I went back into sales, took over our largest account as Phllips Cables and was hired a year later by the same account, a company called Anixter as a marketing manager and purchasing manager for Canada. I worked for Anixter for three years. We had great growth in the three years I was there. We grew from 52 million to 142 million, the bottom line improved. Then I was hired by their biggest competitor, a company called Texcan as Vice President General Manager for Eastern Canada, took over a 30 million dollar business, nine branches, located in Toronto. We grew the business from 30 million to just over 100 million in the four years. We were bought by a US company and that subsequently put us into receivership, so it took a good company down. In 2000 I went to work for a company called Schneider Electric, one of the largest manufacturers in the Canadian electrical industry, as Vice President of Sales for the organization. I spent four years at Schneider, basically lots of transition during that four years. We had three presidents, the last in 2004. I applied for the president's job, was not successful, but ended up going a different career path, and in 2004 I started my own company, Munden Enterprises, and moved back to Wolfville, and that is where it stands today.

Tony_Munden_Q2: Can you describe a typical workday for yourself?

My day is spent networking, both internally and externally, basically touching base with our key customers, our key manufacturing partners, our key distributors, as well as the internal guys within our organization, looking for new projects, basically following up on what is happening in the marketplace.

Tony_Munden_Q3: Can you describe your role in the organization?

My role is to set the strategic direction for the organization, look at what is the next big opportunity that we are looking at as far as a major project, a new venture as far as a manufacturer product that we can sell, or just setting strategic direction as I said overall, in where we are going.

Tony_Munden_Q4: Can you describe your leadership style?

Early in my career I had a boss that said to me, 'when you become a boss, are you going to be the type of boss that you want to work for', and that has always had an impact on how I manage people. I am a big believer in the team. A team should be successful. You can have great players and they win games, but a team wins championships. I spend a lot of time focusing our efforts as a team on where we are going, what we are going to do, and celebrate our success, and reward your people for that.

Tony_Munden_Q5: What does good performance mean for you in your position?

Basically, we set the expectation that with our organization, we want to outperform the market that we are in, and we really set a level that whatever the marketplace of a particular product we are selling is, we want to go twice that market, as far as growth is concerned. So if it is a six percent growth, we want to be at twelve percent. We set some expectations high. That is really what we are looking at as far as our success is concerned.

Tony_Munden_Q6: What does your organization do and how is it different?

Our organization, as I said, is a manufacturer's rep agency in the electrical industry for Atlantic Canada. We sell electrical commodity based products to wholesale distribution and to the electrical utilities, and really what makes us different from our competitors is we set a lot of business plans and programs in place with each of our manufacturers and distributors, we establish an ongoing communication with them, we set objectives, we meet those objectives, and if we are not, we meet to decide how we are going to change the course to make sure we do succeed.

Tony_Munden_Q7: How is your company structured or organized?

The company is an incorporated company. We have myself as the president. I have a vice president who is very involved in the decision process. We have one other employee and three contract companies that work for our organization. We are a sales organization. Everybody on our team sells every day, and from a perspective of making sure we are doing the right thing, we communicate very, very much.

Tony_Munden_Q8: Can you describe any key events that occurred either in your life or that of the organization that were crucial to success over time?

I think the biggest issue for me in the success of my current business was the first 18 years of my career. Making the career choices that were made, establishing the network of contacts across North America in the electrical industry from the manufacturing point of view, from the distribution point of view, that all led to the current success of our current organization. Really, if I had not done all those other things, we would not have the success today. When I lost my job in 2004, and I was looking for a new opportunity, I did a little bit of consulting work for one of the organizations I now represent, and as part of that, we were looking at the Canadian electrical market, and looking at everything from the size of the market to resources and everything else. Part of their process was looking at, in Atlantic Canada, who their competitors were, how many people they had and everything else. They were looking for a representative agency in Atlantic Canada. Part of what came about this was I was looking for a job. As part of the proposal I put forward to them I started my own company and they gave me the line. It was a two million dollar region for them at the time, where seven years later it is an 18 million dollar region. That has been part of the success.

Tony_Munden_Q9: How does your organization make money or sustain itself financially?

Our organization makes money based on the fact that we are, as I said, a manufacturer's rep agency. We are 100 percent commission. We are under contract with each of the manufacturers on an annual basis, but there is a 30 day exit clause for both sides, so we consistently have to perform. We are exclusive, as far as the territory is concerned and basically we are paid on all sales into the region made by that manufacturer.

Tony_Munden_Q10: Who are the customers of your company and why they buy its products or services?

Our customers are the public utilities, power utilities, telephone utilities. That represents about 20 percent of our business. The other 80 percent would be the electrical wholesale distribution market. They would in turn sell to contractors and users, OEMs, so we sell a tremendous amount of product through the wholesale distribution market. The reason they would buy from us is basically, they would buy from our manufacturers, number one is national or regional buying relationships that are made between the manufacturer and the major distributors. Secondly would be national or international buying groups that the distributors are part of and the manufacturers are members of, or approved suppliers. Number three would be inventory, price, service. Number four would be the manufacturer's specification quality, customer service, and lastly, what we consider most important is the fact that they buy from our organization based on our regional coverage, our knowledge of the marketplace, our knowledge of the customers, the local coverage we give to their branches, and basically working together on achieving success.

Tony_Munden_Q11: Can you describe the industry within which your company operates and how it is changing?

We are in the electrical infrastructure industry, so we supply to the electrical power utilities, the telephone utilities, internet service providers, and that represents approximately 20 percent of our market. The other 80 percent would be through the electrical wholesale distribution market, who would in turn supply the contractor marketplace, the industrial and commercial sectors in the market, and the OEM market. Basically, our market is challenged with everything from commodity pricing, being aluminum, copper, steel, and oil prices based on plastics or the compounds, components that go into the products. The other big challenges facing our industry right now are the influx of offshore product, from Asia, Mexico, and everything else, but mainly in the Asian market, and everything from low price, and sometimes low quality, so there are a lot of issues regarding that.

Tony_Munden_Q12: How do firms compete within this industry?

Based on the fact that it is a commodity based industry, price is certainly a big impact with that, and the price, really volatility is based on some of the commodity markets and how you deal with your inventory and the time you price and purchase it. The other thing, services is certainly part of that, and inventory, where you hold it and availability to it make an impact.

Tony_Munden_Q13: How are companies in the industry dependent upon others for their success and what are some of the action that can be taken to reduce these dependencies?

Because price is a big portion of the whole model here, if you are a general wholesale distribution company, you rely on the manufacturer's inventory, and as such, you are very subject to the volatility of the pricing of the commodities, based on up and down pricing. So if you are a wholesale distributor, you will rely heavily on the manufacturer's inventory for your business. We also have specialty distributors in our marketplace who heavily invest in inventory on an ongoing basis, and they take some of the fluctuations out of the volatility of the price. When the commodities are going up they make a tremendous amount of money. When the commodities are coming down, they are at the same level as the wholesale distribution, and they mitigate some of the loss, but they play more on up markets than they do on the down markets.

Tony_Munden_Q14: What is the role of regulators or government in this industry?

The biggest role for regulators or government in the electrical industry is regarding safety. Do the products meet the specific guidelines of CSA and the electrical guidelines that they set as far as minimum standards, so that is really the only role that the regulators play.

Tony_Munden_Q15: What big issues will companies in your industry be addressing in the next five years?

The biggest issue that we have in our industry, which is probably not that much different from any industry right now is people. There is a tremendous amount of mid and senior level managers, as well as day to day people that are going to retire within this industry in the next 10 years in particular. Our industry as a whole has not done a good job of bringing new talent into the industry, and looking at where things are going. That is a huge challenge for us.

Tony_Munden_Q16: Can you offer an example of an issue that can cause conflict within your organization and suggest how conflict, when it does occur, can be resolved?

One of the big areas of conflict for us is we are very serious about the brand we have created as far as Munden Enterprises is concerned. This relates to a code of conduct of how we represent our organization, the level of service we provide, and the commitments we make within the organization. One of the things we say is we say what we do, we do what we say, and we do not make commitments that we cannot keep. If one of our guys in our organization puts himself in a situation where he over commits, or makes a commitment that really he should not have, that is where the biggest conflicts happen within our organization. It is really related around making sure that we can say what we do, and do what we say. If one of our gentlemen, one of the guys of our team makes a commitment that he should not have, the first thing we do is try to fix it, to make sure that we can resolve the issue. The second thing is to get on the line, or get on the phone, or get on a conference call, or go face to face is the best situation, with the customer that we have made a commitment to that we cannot meet, the commitment that has been made, and resolve it as soon as possible. We do not want to leave anything hanging. Really, it is about establishing an expectation that we can meet and exceed every time. It is really about making sure we do not let our customers down.

Tony_Munden_Q17: How can a company address a situation of failure, where an internal project is failing or where demand for its products or services is declining or disappearing?

If we establish a project and some commitments from ourselves, a manufacturer, distributor, or customer, or whatever it may be, one of the key things that we do is basically communication. Communication is a huge part of it. That is establishing a regular time frame for review, if that is a weekly conference call, if it is a webinar, a WebEx, face to face meetings are best. The best thing we can do is sit down with an individual, review the progress, see if we are on track, if we have gone off track, to make adjustments, and to ensure that we get things back on track and assign accountability right away. One of the things we do with our organization is we assign a product champion for each of our manufacturers within our organization. So if we have a project that is underway, that person is responsible from the start to end in making sure that the project stays online, and as I said we have a weekly conference call where any key issues are resolved, or at least highlighted, and if there is some resolution and that needs to take place we make sure it happens.

Tony_Munden_Q18: What aspect of managing do you find most challenging and what are some of personal strategies that you use to address these challenges?

To some extent, sometimes you have to let go. You do not want to take on too much, so delegation can be tough sometimes, but in the same regard, in order for your company to grow you have to delegate responsibility and let people experience the pluses and minuses of taking on that challenge, and also being able to reward them for doing a good job, and if we are not doing a good job, to learn from the fact that we have gone off track and here is how we are going to fix it. The organization will grow as a result.

Tony_Munden_Q19: How might you or your organization leave a legacy or make a different.

I am fairly involved in the fundraising side of it and we do a lot of things within our own organization from a fundraising point of view as much on the organizational side as on the personal side, yet you have to give back to the community. I have been very involved in the fundraising, particularly here at Acadia, with football and it is very rewarding.

Tony_Munden_Q20: Can social media help your company succeed?

About four years ago we decided to establish an electronic marketing program and the electrical industry is an old boy's school to some extent and really there was not a lot of this happening. One of the things that we established was as simple as taking everybody's business card, working through developing a database, in which we basically took all of our customers and our distributors, and separated by job function, so sales, inside sales, marketing, purchasing. Then we also did it by vertical markets, so utilities, contractors, OEM's, industrial, and basically we have established an ongoing electronic marketing program that basically we adjusted over the last four years, and it is four emails per week, it is designed to specific market sectors, and it has been very successful.

Tony_Munden_Q21: Can you offer more insight about the industry within which your company competes?