Polaris Industry Inc. Strategic Analysis and Executive Summary

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Executive Summary

According to Polaris (2015), Polaris Industry Incorporated had its establishment in 1956 in Ohio, United States and currently has its presence on five continents with its products. The company designs, makes and markets automobiles, spares and accessories and concentrates in utility and recreational vehicles. Its high quality, innovative motorized vehicles include all-terrain, off-road vehicles, snowmobiles, and motorcycles. The company ventures in new products in its area of focus and is a leader in the industry category and market segment across the globe. High executive team with the ability to handle different challenges facing the company to see it perform manages the company.

Major Internal Factors

            Lee, Lee, & Lee (2009) argue the company has distinct product portfolio and due to its high-quality outputs and commitment to innovation, it has a strong brand name and is a global leader in its market and industry. It has the technical and financial capacity to produce the automobiles within its line and expand into new markets (Polaris, 2015). Though the company dominates the market, its large product line is hurting its operations and performance.

Major External Factors

            The company operates in the global leading markets and faces risks same as opportunities (Danielmeyer, & Takeda, 2012). With the existing trade barriers and changing policies, the company needs to be keen on different aspects and ensure compliance. The company faces negligible competition within the industry it leads and has a stronger capital base for expansion.

Major Proposed Strategy

            As an industry leader, the company can choose to diversify in the market with relevant products within its line and differentiate them from the products of its competitors. It needs to engage in continuous product improvement to avoid spending more on developing products.

Strategic Analysis of Polaris Industry

Internal Analysis

Polaris is an automobile manufacturer specialized in off-road vehicles of all types for recreational purposes and utility. Its product portfolio majorly includes side vehicles, all-terrain vehicles, motorcycles, snowmobiles, electric cars and Polaris defense. Other than the automobile, the company produces spare parts and accessories for their products and provides financing, insurance services, and extended service contracts to their clients. The company has operation bases in Europe, America, China, and India with its headquarters base in Ohio, USA.

Due to its high quality and innovative utility and recreational vehicles, the company is leading globally in the industry for its designs and manufactures. The company got establishment in the year 1956 and has commanding base in the United States and Canadian markets (Polaris, 2015). The firm has the capacity both financial and expertise to expand its services further to other markets and exploit opportunities of the growing markets. The institution is committed to research and development for the expansion of their products and development of their designs to suit their different markets.

            The major strengths of the company are;

• The significant market presence in the utility and recreational automobile industry
• High brand recognition in the category of their vehicles and dominance in their markets
• Continuous research and development to improve their brand that has long time presence

Its primary weaknesses are;

• The broad product line it offers that hurt the company productivity.
• Inability to achieve successful market presence in the new market segments

Management

            Polaris Inc. has over 3000 employees who are non-unionized and salaried within the company contracts (Polaris, 2015). It has a strong management structure led by the chief executive officer, and well compensated to contain turnover and ensure commitment of the management to the service of the firm. The CEO is the executive director while the chief operating officer is the president assisted by vice presidents in the capacities of finance, technical services, information, compliance, sales and marketing, human resources, global development and snowmobile (Polaris, 2015). The management team has the vast expertise necessary for running of the company in its operations, advancement, and expansion program.

 Election of the group executives is at the discretion of the company board with no fixed term or job expiry dates. This practice gives the team job security and boosts their commitment to the institution to achieve better results and attain higher position in the markets and industry (Polaris, 2015). Service to the company extends for executives with most of team members getting promotions and new placements on the exit of one of them or when a person moves to another position.

Marketing

            The company products are marketing and sales are through network of dealers, subsidiaries, and distributors all over the world. The snowmobiles sales are direct to dealers within the Snowbelt areas giving it capacity to produce more and specialize as per the needs of clients, both dealers, and buyers. Distribution of products across the globe is through dealership of distributors within regions as it has ownership of its distributors through acquisition in New Zealand and Australia (Polaris, 2015). Increased control of markets of the areas the company is operating in increases its sales and profit margin giving it a boost of growth. According to Adebisi, & Babatunde (2012), its sales and marketing get a boost through agreement between the company and banks to provide financing to customers buying products of the enterprise. Through the agreements, the company raises its sales and profit margin through share of interests generated and boomerang sales from contracts. The company also promotes its products through events and functions and licensing the use of its name for other products that is likely to broadcast the name and range of products.

Finance

            The company owns property and assets all over the areas it operates in and has a relatively consistent stock performance in the markets. With the commitment to expansion and improvement of the company and products, it experiences improved sales and earnings over the years (Polaris, 2015). The company share gains and retail sales at some points surpass the predictions to earn the company higher performance and at different years. The dramatic financial performances of the company relate to balancing act to produce within lower production costs and market demands. The company is shifting to diversification efforts to achieve performance in the markets and drive sales in the existing and new markets.

The table below presents financial income summary of the company for four years, depicting an observable trend that projects direction of the business’s financial position based on the analysis. The revenue is on a steady increasing trend for the four years though cost of income too depicts the same pattern. Ultimately, the profit is also on a rising trend for the firm (Lee et al., 2009). As expenditure and investments keep increasing over the years for the company, its financial position is still secure, and the trend shows performance with swelling profit mark (Flannery, 2012). With growth in the company financial performance and base and the rising profit, investors can expect similar pattern in their dividend per share as shown.

Source: Polaris.com (2015)

            With rising share prices and revenue earning, the value of the company in stock markets and its stock performance would increase giving it financial advantage. The sale of motorcycles, small vehicles, and accessory are contributing factors to the performance of the company over the four years making the level of sales to be on the rise. The general percentage of sales rose from 26% in 2010 to 30% in 2014 showing an appealing trend in sales of the company products and contributing to improved earnings over the years (Polaris, 2015). Within a period of five years, dividend per share almost tripled from 0.7 to 2 dollars depicting suitability of investing in the company and attracting interest of investors (Polaris, 2015). The company assets are increasing at an incredible rate while its total liabilities stay at almost steady rate indicating proper financial performance with less debt at the enterprise (Flannery, 2012). The company long-term debts and lease obligations have remained at all time low over the years presented while owners’ equity is gaining an increasing trend.

Production / Operations

            The company currently produces about 70% of off-road automobiles and increasingly been introducing new products and models for its markets (Polaris, 2015). The company operates in different markets and has to manufacture products to target different areas even though its differentiation and diversification strategies are not clear. The multi-model designs of vehicles that the company produces are of different standard lines and cost differently across the markets and models even as the company targets a different type of people (Polaris, 2015). Through its continued research and development, the company has increasingly been improving on its products, releasing adjustments, and new models over the years to replace previous models and attract more client base.

The company ceased producing marine products due to technical and marketing challenges and lack of commonality with its produce. Assembling of the company products takes place at their typical manufacturing plant with similar technology applied in the process due to characteristic features of the products. The institution production process has vertical integration for all their products while obtaining other components from third parties to help complete production process. Other factors of production required by the firm are readily available from other parties and from within, and the workforce is fully equipped and familiar with the process, use and maintenance of the equipment and products (Polaris, 2015). Adebisi, & Babatunde (2012) argue the institution is committed to expansion and flexibility of production, focusing on specialization in the process of production. All the products and parts production are almost originating from different factories and assembling done at their primary built-up facility for the final product. There are also manufacturing centers of excellence brought up by the company to revamp their production process and do away with older plants.

Providing of a Service

            According to Polaris, (2015) the company produces, and supply spare parts and accessories for their automobile models of all makes to support replacement and maintenance of their products. The firm as well markets recreation apparels as complementary products to their products, which the company got to purchase from vendors per the business specifications and sold through the same line of sales of their automobiles. The company has an online platform subsidiary for its e-marketing and the provision of information necessary for client support.

Information Systems

            The company has internet website that is accessible for all necessary information regarding the enterprise and giving opportunities for inquiries and rapid response over the website. The company reports are available through the site as per the requirements, and such reports undergo electronic filing with the relevant bodies for compliance checks and referencing (Polaris, 2015). Together with the corporate governance materials, chatters and other necessary documents, all the necessary reports as required are available on the well-maintained website and any official document is obtainable through written request. Lee et al., (2009) argue the regular and annual reports would communicate a picture and situation of the company at that particular time and give forecast of possible events and changes. The information provided through the available means within the enterprise gets updating as soon as there are changes and amendments to provide actual communication about the company at the respective times.

Research & Development

            The company has close to 400 employees engaged in the research and development unit, testing, and development of the existing and new products. According to Lee et al., (2009), the research and development group handles the improved production techniques and invention of new methods applicable to the structural processes. There is increased advance in efficiency of the company products and response to the demand and needs of existing clients and target markets. Internal combustion engine available in the factory helps to design and optimize engine configurations to improve efficiency of the models released to the markets.

The company gets to utilize specialized facilities to match the systems and operation of their products to achieve desired output in terms of performance, energy consumption, power output, and minimizing noise. Prototypes are conventional means by which the company gets to produce and test products before actual productions for the real release to the markets (Danielmeyer, & Takeda, 2012). The research and development teams get to conduct trials on the prototypes and plan and design manufacturing procedures and processes for efficient product release (Polaris, 2015). The company has a construction whose particular designation is engineering, research and development in Wyoming, Minnesota. It has continued acquiring firms to ensure that it develops higher performance and efficient engines and transparent innovation-oriented vehicles.

External Analysis

            The company has not only grasp of the local market but also commands a greater share of the American and European market together with and extension to Asia and Australia.

Polaris is increasingly expanding its presence and dominance in the markets with the target of its products that are not present in the target markets or with fewer competitors (Polaris, 2015). The company has achieved international expansion through dealership and acquisition that has seen it command new markets and displace other players.

            The primary opportunities for the company include the following

• Differentiation of the diversified products to fit the markets
• Target the growing markets with relevant products designed to meet the markets.

The primary threats include the following

• Entrance of subsidy products and stiff competition in its original and emerging markets
• Stiff regulations and barriers to entry into the potential markets

Competition

            The company has unique concentration in the line of automobiles for recreation and utility that other manufacturers have not ventured. It takes a larger command in the industry as compared to other competitors and diversifies as others only concentrate on one line of products and their accessories (Polaris, 2015). It is attributable that high capital is required to enter the recreational automobile industry and with greater expenditure to produce one vehicle with proportionately higher research and development fund requirements. The transformations in large automobile companies in engineering advancement would enable them compete Polaris in the same industry (Polaris, 2015).

Industry

            The industry for the recreational vehicles has no much domination as compared to utility vehicles, and higher cost of their production relates to the higher pricing (Lee et al., 2009). The potential customers of the industry products shrink because the prices of products are higher, and their utility limitation is on recreation and entertainment compared to competing products. The high costs involved in venturing to the industry and engineering advancements are the primary turns off to companies that would like to venture in the industry (Polaris, 2015). There is no substitute for the company products due to their unique designs and functions and the market driving factors. For instance, no other automobiles can offer the capability of snowmobiles and their individual futures thus their duties substitutes are almost not available.

            Buyers have limited options of companies to choose from within the industry, and the strong brand image of the business in the markets gives it greater opportunity to dominate the industry. The small number of players in the industry presents buyers limited options to choose from even as the companies releases abroad range of products with an option to choose from the available goods or miss having one. Polaris continues to focus on its strengths within the industry even as it has presence in different segments and the slim possibility of competitors entering the part (Polaris, 2015). The level of competition within this industry is minimal, and the key players experience steady growth without possible projection of boomerang growth in recent.

Economic

            The company can venture more in the sub-industry and continue its domination due to the economic implications for other businesses that would like to venture (Polaris, 2015). There is large capital requirement for startup and maintaining operation and productions that not every company would afford to venture without proper projection on income. Commodity inflation and currency shift are some of the economic factors the company is likely to face since it operates in different markets, purchases products, and raw materials and sells its products (Flannery, 2012). The company is likely to face financial related risks in foreign exchange due to the shift in currencies and the fact that it owns assets in foreign markets reported in differing currency (Polaris, 2015). Different policies in various states are also likely to affect the operations of the company more so those that which do not favor its operation or grant it bottlenecks.

Demographic

            There are no demographic factors directly affecting the company other than the growing population that leads to expansion of settlement and restructuring of land (Polaris, 2015). People occupying land and terraces that the company products uses almost render the automobiles like the terrace vehicles worthless.

Geographic

            Different locations of the company manufacturing plants are a factor to consider, but they are not hindrance to its operations (Polaris, 2015). The company acquired units in various places that it uses to produce different products, parts, and accessories that it assembles as finished goods and has establishment of manufacturing plants in several parts. Proper coordination of these plants and their specialization for specific tasks make it easier for the firm to ensure efficiency of its operations without hindrance.

Legal / Political / Governmental

            Polaris is particular with compliance and legal issues and has an arm established to take care of any necessary measures (Polaris, 2015). Due to its operation in global markets, the company is likely to feel the effect of different policy demands and change in legislations within its area of operation in those countries. Even as much as the company gets result from such policies and the changes, it has to develop measures to navigate markets and achieve the desired performance and profits (Adebisi, & Babatunde, 2012). The company must set standards in line with particular business environments they are operating and be sensitive and flexible to policy changes to avert any possible legal and political consequences.

Social

            The company focuses on producing recreational and utility vehicles that adapt to different environments and must be sensitive to the needs and different markets it ventures (Polaris, 2015). The company, for instance, realized that marine products were costing it more than generating revenue, and their demand was little. It had to change and drop the line of products to concentrate more on needs and sales to clients (Adebisi, & Babatunde, 2012). The company can exploit the changing social trends to identify the possible means of ensuring that it produces what has higher demand and relevant for recreational purposes in the different markets at different times. The changing social trends and preference are likely to cost the company some of its products with customers shifting base to different products from competing agencies.

Cultural

            The cultural difference between various markets the company operates in does not affect sales of the company products due to customers targeted by the products. However, considering the cultural differences and aspects, which are major and can influence their sales it would be advisable to match the needs of the practice of the customers (Lee et al., 2009).

Technological

            The industry Polaris operates in requires advanced technology for research and development to improve and manufacture its products (Flannery, 2012). The continuous engineering advancements the company engages in give it a leap over competitors giving them a range in competitive scale. The ongoing commitment to research by the company gives its products a stand-alone stature and distinct from any other machines manufactured by other firms (Polaris, 2015). The continuous technological improvements and advancements in line of the products handle its strong brand and the continued growth in sales and revenues.

Proposed Strategies

            There are different strategies recommendable and apply to Polaris that could make it improve its performance and dominance of the markets it is operating, in terms of sales and revenue incomes. With the financial capacity of the company and stronger market presence and brand image, the company can maintain improved performance and dominance over existing and new competitors to gain a solid position. The company can also venture into new markets where its products are relevant and efficiently operate with them without significant challenges or hindrances (Adebisi, & Babatunde, 2012). The company produces diverse products for various markets without concentration on the same line of production. Focusing on single product line can earn the company more even if it was to concentrate on different areas.

Strategy #1: Diversification

            This strategy can be a long-term venture that would make the company achieves financial performance even in sight of the decline of sale of other products. Through acquisitions, mergers and partnerships, the company can invest in different sectors and use its operations to offer different products that would sell to support the revenue base other than its primary productions. This strategy would ensure the company continues to exist and achieve financial performance and competitiveness in the market even with decline in sales of other products (Flannery, 2012).

Strategy #2: Continuous Product Improvement

            With strong research and development unit, the firm can commit to constant expansion of its products focusing on efficiency and cost to attract more customers (Lee et al., 2009). Use of current models, the company, can seek to focus on minimizing cost of production to produce a better version of the current models and lower prices of finished products. Continuous product improvement is a strategy that helps a company to reduce investment in producing newer models, but improve on existing models to release better versions of similar models.

Strategy #3: Differentiation

            The company can seek to focus on differentiation of its products in the markets to produce relevant products at the relevant markets different from what the competitors offer. For instance, focusing on snowmobiles in snow areas would reduce extra costs such as those associated with transportation and give a better focus on the needs of clients to improve the products as per their demands (Danielmeyer, & Takeda, 2012). 

Strategy #4: Industry Leadership

            As a major company with a strong brand in the market, Polaris can take initiatives that would see it maintain leadership in the market and industry. Focusing on products as per the areas of demand and improving on them would leverage the firm against competitors (Danielmeyer, & Takeda, 2012). The company would maintain its strong name through improved products, higher performance and sales and higher profitability ratios. The company can also venture into other markets with new products that the competing companies would not wish to produce yet they have demand. The company should choose to set up businesses of its respective products where they sell more and target other places with products of the enterprise where they would sell.

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