Logistical Organization

Introduction

This report focus on the company's background, market, market share, key competitors, logistical organization, potential opportunities and challenges within the industry, which intends to help people understand how Schneider Electric review its market position and use logistics to support overall company, industry, and market share objectives. At the end of report, it will give some career tips to students, especially for recent graduated students who are interested in the same industry.

1. Company Background

Schneider Electric, as a producer of iron and steel, was founded in 1836 in France. Focusing on armaments produced in the beginning, Schneider switched to electricity market after WWII. During this period, the company was reorganized in order to enrich its diversity, which eventually aimed at opening up new markets. Schneider expanded itself greatly by purchasing or merging other leading companies in certain strategic markets, such as electricity components and UPS market. Through this process, Schneider has owned several famous brands, including APC, Juno, Pelco, Square D and so on. Throughout its 176 years history, Schneider has become a multinational company specialized in power management that serves more than 100 countries with over 130,000 employees.

Within the field of power management, Schneider Electric covers five areas including Energy & Infrastructure, Industry, Buildings, Data Centres & Networks and Residential, of which they especially concentrate on Energy & Infrastructure.

Schneider Electric covers two core operational areas: electricity management and automation management. Firstly, in electricity management part, Schneider Electric provides products and services such as energy monitoring and controlling, smart electrical networks management, electrical distribution and etc. Secondly, in automation part, Schneider Electric produces automation hardware and software, for instance, cooling systems, electrical switchgear and generators, etc.. Schneider Electric provides these products to several kinds of customers, including distributors, electricians, system integrators and so on. In order to satisfy various demands of customers from over 100 countries, Schneider Electric makes full use of international teams and encourages exchange of knowledge and experience among employees. Such kind of operational model can not only help Schneider Electric get involved in local market, but also create new method of power management.

2. Market

2.1 Company's Size of Market and Position Strategy

The whole revenues generated by almost 880 power conversion equipment manufacturing companies reached to $10666.3 million in 2012. Schneider Electric SA earned 559 million dollars in 2012，who owns 5.2% market. Owning the fifth market share, Schneider Electric is a challenger in this part. Schneider is facing challenges from leader companies and followers. The ultimate goal for Schneider Electric is to keep developing and be the leader in this industry. The pie chart 2.1 shows top companies in this market.

2.2 Challenges and opportunities associated with the market

In order to figure out the challenges and opportunities within the industry, we have to analyze the competition within it. In this case, we will use Porter's Five Forces Model to do the analysis. (See chart 2.2)

To open a new business, companies have to invest much capital to run a large-scale facility. Besides the capital requirements, companies already within the industry benefit from the economies of scale to lower their costs and make more money. Since most products and services have been integrated into a systematical business solution, the cost for customers to switch from one company to another is really high. What is more, leading companies in this industry have a lot of patents that are hard to acquire, and that keep companies from entering. All in all, the threat from potential entrants is low.

As to the substitutes part, there is no substitute to power equipment as long as the customer wants to use electricity. As discussed above, switching cost for customers is high, and this is also true for customer switching from one kind of energy to another. Thus, the threat from substitutes is low.

Companies within the market have great demands for different kinds of raw materials, such as mineral and steel, in order to operate a large plant. The cost of materials is the largest expense, estimated to represent about 45.0% of industry revenue in 2012. Purchased inputs include stamped metal parts, ferrous and nonferrous wires and metals, electronic components, plastics and petroleum coke. (Waterman, 2012)

Energy crisis has become a huge issue in the world, especially for energy companies. The price of these raw materials is becoming higher and higher, which dramatically influences the total cost of companies. In order to obtain a safely supply from suppliers, companies tend to cooperate with suppliers in a long-term period, which strengthens the supplier power. Thus, the supplier power in this market tends to be high.

This market can be described as an oligopoly market, since five major companies account for 42% of the total sales. Thus, buyer power is weakened because of suppliers' monopoly power. However, products offered by companies are similar to some extent, thus buyers can get some choices based on price. As the products and services put a high switching cost on customers, buyer power can be considered moderate.

Nearly 880 companies compete in this market, so the rivalry is intensive. Companies within this industry tend to have high fixed cost and value of fixed assets, thus the exit barrier for companies is high. Put these factors into consideration, the industry rivalry within the market can be concluded as high.

In summary, threats within the industry mainly come from suppliers and competitors.