Practice exam 5

Rijnland Energie is a regional energy supplier with 180,000 customers and 600 employees. The board, led by Els Verhoeven, will soon decide on an investment of 90 million euros in extra generating capacity that will only be ready in four years. The strategy department has made three forecasts for this decision.

• Ageing population: the number of households aged 75 and over in the region will grow by 3 percent per year over the next three years. This follows from the population statistics and nobody disputes it.
• Economic growth: the planning bureau expects growth of 0.5 to 2.5 percent over the next three years, with 1.5 percent as the most probable outcome. Business demand for electricity follows economic growth.
• Elections: national elections will be held in six months. Party A wants to subsidise heat pumps heavily and ban new gas connections (40 percent probability). Party C wants to stop the subsidy and expand gas (25 percent probability). A coalition of both parties, B, lies in between (35 percent probability).

Something else stands out. For half a year, customers in more than ten villages have kept asking the helpdesk about home batteries, mainly households with solar panels. Installers think this is a lasting trend, but the grid operator calls it a hype. In January, the standard peak-demand model, which had been reliable for years, was unexpectedly 12 percent off. Analyst Tom de Wit calls all this 'noise' and wants to ignore the questions and continue with the existing model.

Bubbl from Utrecht makes sparkling-water dispensers for offices. The company has 220 employees and a turnover of 48 million euros. Facility managers usually buy the dispensers through a tender, and almost all tenders require a hygiene certification.

In five years, the market for office water dispensers has grown from nothing to a market with fourteen suppliers. Growth has fallen from 20 percent to 8 percent per year. Last year three suppliers stopped, the remaining suppliers are cutting their prices and profits differ widely: two large suppliers earn well, others make a loss.

Bubbl has made 10,000 dispensers in total and recently reached 20,000. In that period, the cost price per dispenser fell from 265 to 212 euros. The assemblers now need 30 percent fewer minutes per dispenser, and after a redesign based on the experience with the first 10,000 the cooling unit has half the number of parts.

The largest competitor, Aquaflow, has a cost price of 190 euros per dispenser. Director Sanne Vermeulen wants Bubbl to become the cheapest supplier. Her plan: buy cheaper filters, which according to the company's own test lab will not pass the hygiene certification, and cut the service staff sharply.

Orfeo Strings from Zutphen builds violins and cellos for professional musicians. The company has 45 employees and a turnover of 9 million euros. Director Joris Bakker wants to know where Orfeo's success comes from. He names three things.

• CNC milling machines: Orfeo uses them to pre-process the wood. It is a standard machine that anyone can buy, and all competitors use the same machines.
• The varnish: Orfeo works with its own varnish, for which musicians pay 30 percent extra. Only Orfeo had it. A competitor fully copied the recipe after a year, and by now two other brands use it as well.
• The Orfeo Academy: for four years, students learn the trade alongside master builders, especially the knowledge about choosing and adjusting wood that nobody has written down. Musicians pay well over 40 percent extra for the sound of an Orfeo. In ten years, no competitor has managed to match that sound. Master builders receive a bonus for training students, and the Academy is central to Orfeo's marketing.

At a trade fair, Bakker noticed that young musicians in Asia increasingly ask for a silent practice violin with electronics. Within a year, Orfeo launched a silent violin. For this it hired two electronics engineers and rebuilt its production process.

Velomotion from Arnhem makes electric bicycles in one large factory. The company has 450 employees, a turnover of 160 million euros and a return on investment of 14 percent. The bicycles are sold through 300 independent dealers, who keep about 30 percent margin. The board is looking at three things.

• Own shops: board member Lars Pol wants to open 25 own shops. This costs 30 million euros and is expected to yield a return of 6 percent per year. Pol says: 'With our own shops we pocket the dealers' margin ourselves, so that increases our profit.' Nobody at Velomotion has experience of running small shops; the company only knows large factories.
• Battery packs: Velomotion buys its battery packs from Voltcell, one of the two certified suppliers in Europe. The other is fully booked for years. A battery pack is complex and changes generation every year, so not everything can be laid down in a contract. Velomotion adapted its frames and assembly line to Voltcell's packs; that investment of 8 million euros is worthless without Voltcell. Last year Voltcell raised its price by 15 percent and delivered later than agreed. Velomotion's own test lab shows that the company can make battery packs of the same quality itself. The board therefore considers making battery packs itself.
• Customer service: 25 own employees answer customers' questions. This is not a core activity. Several specialised companies offer this for about 20 percent lower costs, with simple standard scripts, and switching provider is easy.

Groenhart Systems from the horticultural region of Westerveld makes climate computers and software for greenhouses. The company has 120 employees and a turnover of 30 million euros. Westerveld has the following characteristics.

• A horticultural college and a research institute produce 200 graduates every year.
• The growers in the region are demanding. They compete on energy use per kilo of produce and ask for better software every season.
• Within 30 kilometres there are sensor makers, greenhouse builders and seed breeders.
• There are twelve climate computer makers in the region. New features of one are copied by the others within half a year.

Director Mirjam Kooi wants to expand to southern Spain. She says: 'We take the strength of Westerveld with us, so we will win there too.' Her first talks in southern Spain show that growers there are small businesses with simple plastic tunnels. They make few demands on energy efficiency, because the sun is free. There are no sensor makers or greenhouse maintenance companies nearby, and there are no Spanish climate computer makers.

In Spain, Groenhart can build its own factory or license a Spanish partner that makes the computers. The climate software is the core of Groenhart and is easy to copy; a Spanish partner could take over the knowledge and become a competitor itself.

Kruijt Transport from Zwolle has 800 employees, fourteen depots and a turnover of 120 million euros. Founder Piet Kruijt, a former soldier, started forty years ago with one truck. His daughter Marloes Kruijt is now director. She wants to turn Kruijt into a logistics partner that advises customers on their supply chain and emissions, instead of just a carrier.

Kruijt's culture is strong. The company is known for the thought: 'We always deliver, whatever happens.' New drivers hear stories about colleagues who drove through the snow to deliver on time. The first truck of Piet Kruijt stands in the hall. Every Monday starts at six o'clock with a briefing that shows the number of on-time trips per driver. Drivers receive a bonus on the number of on-time trips; advising customers earns no bonus.

Marloes announced the new strategy in an e-mail and at a meeting. She says: 'I explained it, so everyone understands it.' But each of the fourteen depot managers puts their own spin on it: one tells his drivers that from now on they must advise customers, another that it only applies to large customers. Depot manager Yusuf Demir was the first to notice that customers increasingly ask for emission reports, and brought this to the attention of senior management. In his depot he started a trial himself in which experienced drivers advise customers.