1. Executive Summary
The plastic injection molding industry is a huge market that continues to grow due to demand of the products and services in almost every industry sector. A new business start-up is planned to debut in Boston, Massachusetts at the beginning of January 2012. The company, named Plastechnology, will manufacture custom injection molded plastic parts for original equipment manufacturers (OEMs) to their specifications. This paper presents a business case analysis of the start-up company from the author’s perspective as a leading partner of the venture.
2. Market Analysis
2. 1. Market Size and Segmentation
According to Freedonia (2008), the plastic injection molding industry records an annual growth of 2,8 percent cumulating in 16 billion pounds valued at US$14.7 billion for resins content only. The industry has a total market volume of US$36.8 billion of which resins account for 40 percent.
The plastic injection molding companies in the United States gain from producing high quality products and have been able to maintain competitive edge in this product segment. On the other hand, the production of low-end consumer products has been dominated by Asian countries, particularly China. In order to profit from the low-end business, some American companies operate manufacturing plants in partnership with Chinese firms in China, Cypress (2011).
2.2 SWOT Analysis
Strengths
The founding members of the company are highly qualified professionals with valuable experience in the plastic injection molding industry. They have a combined experience in plastic materials development as well as product and process development engineering. The creativity and technological expertise that are needed to ensure high quality products. One of the partners has served as marketing vice president of a company that uses custom molded plastic parts as components of its products. He knows the market and has a list of valuable contacts that could provide leads to win contracts.
Weaknesses
The company is new and the founding members are starting a business of their own for the first time. There are financial constraints and the total starting capital that the founders can afford is very low. Family and personal financial issues may impact negatively on the venture.
Opportunities
The plastic injection molding industry is a huge market. Opportunities are available or can be created especially in the niche sectors. Plastechnology will target niche market in the subsector of the industry, where the founders will create competitive advantage through their skills.
Threats
The industry is mature and very competitive with affluent global players. New competitors may enter the business with well trained personnel and latest technology that enables faster manufacturing of high quality custom injection molding products. However, this threat may be countered by Plastechnology by forming partnership with a machine manufacturer.
2.3 Five Forces Analysis of the Competitive Environment
Entry Barrier
The start-up capital for small scale or low-end plastic injection molding business is low, making entry to the business financially non-prohibitive. But expensive, technologically advanced manufacturing machines are required for high volume production and high-end sophisticated products. Plastechnology is entering the market with a relatively low capital, but the founders have gained PrintroneX as a partner. PrintroneX will enventually buy a share of the start-up. The raw materials are easy to source due to large supplier base. However, competition for manufacturing contracts and consulting services is very intense.
Bargaining Power of Suppliers
There are numerous plastic material suppliers worldwide. Suppliers of low-grade materials have basically no power while suppliers of high-grade materials with unique properties needed for the production of intricate components have some power.
Bargaining Power of Buyers
Buyers of plastic materials generally have many suppliers to choose from, thereby acquiring bargaining power. Plastechnology can rely on constant supply of plastic materials as the need demands.
Threat of Substitutes
There are a variety of plastics that are used to manufacture products in the plastic injection molding industry. The popular ones include polyethylene, polypropylene and polycarbonate. In many cases, depending on the required product, a plastic material can be substituted for another. While other materials such as metals and ceramics are also being used to produce similar products plastics are used for, these materials do not pose substitute threats to plastics.
Competitive Rivalry
The competition in the plastic injection molding industry is intense. The relatively low entry barrier to the low-end sector has created thousands of businesses competing for shares of the huge market. Large affluent companies strive to dictate prices and control the market. The direct competitors of Plastechnology have larger number of equipments at their disposal. However, the core business activities of Plastechnology will be in the niche market of the injection molding sub-sector, where the know-how of the founders will help to achieve success.
3. Risk analysis and Risk Management
The used molding equipment bought at the auction might not be able to meet all new custom injection molding demands. Repairs and new parts might be necessary more often than new machines.
In order to reduce or avoid production failure risk, the equipment will be serviced regularly. The founders of Plastechnology will use their expertise to resolve product design and quality issues.
4. Conclusion
A huge market valued at US$14.7 and growing at 2.8 percent annually offers opportunities to creative entrepreneurs. The founders of Plastechnology have proven their creativity and technological expertise through their work in the plastic injection molding sector. They are aware of the problems that are encountered in the custom injection molding business and have gained invaluable insider knowledge. This knowledge reveals a niche market in the subsector of the plastics industry, which the founders are willing to tap. My SWOT analysis of Plastechnology shows that the strength of the company overcomes the weaknesses and the opportunities surpass the threats. The five forces analysis of the competitive environment suggests that Plastechnology should focus on the niche market and differentiate itself from competitors through its value proposition including very high quality manufacturing, punctual delivery, excellent customer relationship and customer satisfaction. With the overall result of the analysis, I am of the opinion that the venture has good chances to be a success. Having secured the partnership with PrintroneX, the start-up can begin as planned at the beginning of January 2012.
5. References
The Freedonia Group (2008). Injection Molded Plastics, US Industry Study with Forecasts to 2010
Cypress Industries (2011). Custom Plastic Injection Molding in the USA.
Retrived from http://www.cypressindustries.com/plastic_injection_molding_us.html
Committee on Equipment Statistics (2007). Annual & Quarterly Reports
Retrived from http://www.plasticsindustry.org
Afritopic 2017
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