Competitive strategy for an Indian natural stone trader

Arvicon International faces some difficulties with their performance. A lot of products are not of sufficient quality and customers complain about this. Next to this, the company has problems to keep agreements with customers, for example the delivery terms. The problem that amplifies this issue is the fact that the company is dependent on a few customers, and so the director is scared that the loss of one of these big customers would drop the sales of the company dramatically. Some customers already threat to stop ordering from Arvicon because of quality problems like broken tiles and delays. With this thesis, we will investigate the competitive strategy the company uses. At this moment, it seems to be that the company uses a cost leadership strategy. With this strategy they want to keep the prices as low as possible, because that is one of the main reasons why customers select them. Furthermore, they face some competition from other Indian natural stone traders. An other issue is that the company promises things they can’t make true. The company should get rid of the goal to be the cheapest. Their financial position is outstanding and compared with the competition, the Dutch speaking sales managers are definitely a pro. One other important point why it’s not wise to face this competition to be the cheapest is, because there are other companies which use child labour and do other unethical things. Instead, Arvicon should use a differentiation strategy in which the firm focus on quality. To do so, Arvicon should change a lot. First of all, the amount of suppliers should be brought back. Only those suppliers who constantly deliver a high quality product according to agreements like delivery terms etcetera should receive orders from Arvicon. It should be possible to pay those suppliers a higher price for their products to be sure that their performance will remain constant. Also the price Arvicon asks for its products should increase. It seems to be that customers prefer quality and not only a cheap price. If an price increase means that there won’t be anymore delays and that all the material will arrive undamaged, the customer will be better off. The department which is responsible for the quality control should reorganize. This is necessary, because it seems to be that they do not work efficiently. According to the director of Arvicon, there are 30 employees working for this department. Those persons have to check only 2000 containers a year together. This should be possible. Next to this, the company should try to slow down the turnover of employees. This can be done by increasing the wage for employees who know a lot about the company and do have an added value for the company. It is important to state that this thesis doesn’t guarantee that the use of an differentiation strategy will be the best for Arvicon. Also the proposals which are done are not detailed enough to implement directly. For example, it would be wise to bring back the amount of suppliers, but it is not clear yet if this is possible. It could be that the capacity of all the suppliers is too low so the amount of suppliers cannot be brought back. That is why the director of the company should have a very critical look to the proposals that have been suggested and base the decision whether to work with a differentiation strategy or not on this report and his own experience.