Name one of the biggest strategic risks and one of the biggest financial risks that you face in your business or industry, and briefly explain how each of these can impact your business. For one of these, provide your ideas on the steps your company should take to significantly mitigate these risks.
Last quarter in my JWI 540: Strategy class, our assignments were based on the company we work for or a company or business in our industry. I work in the school bus transportation industry, so I chose Blue Bird Corporation as the company I would use. In Assignment 2, I had to develop a game-winning strategy to gain the competitive advantage in my industry. My game-winning move was a merger with Traton Group/Navistar/IC Bus, the second-largest school bus manufacturer in North America, a company owned by Volvo that has a very lucrative international presence, and a company that has already partnered with another company to manufacture and successfully market a self-driving truck. The move would have been a game-changing move that would create a sustainable competitive advantage and would generate financially attractive growth.
A significant financial risk the company may encounter is a school district defaulting on a credit sale of a fleet of school buses. I have not come across information about a district doing so, but what if it happens? What if a district that purchased a fleet of 100 propane or electric buses, priced at $200,000+ each, failed to submit the necessary paperwork to qualify for federal funding of alternative fuel buses and defaults on the credit purchase? It is obvious a situation as this would not put the company in a favorable financial position. Of course, the buses could be returned, but at how much of a loss? Districts tend to custom-build their school buses to what their particular district’s needs are, and, depending on the design, the cost could be substantial to reconfigure the buses for resale.
One of the most significant risks involved in this merger is ensuring the required investments are executed efficiently because many mergers have failed due to the lack of doing so. One significant investment that would be required to implement this move is merging the technologies used on the buses of both manufacturers and ensuring those innovations are merged seamlessly on all school buses. It would not be necessary to hire more people because both manufacturers would retain their current employees, but it would be necessary to ensure all employees are trained to know the logistics of both types of buses. All mechanics would also have to be retrained to work on the various types these buses manufactured by both companies. It would also not be necessary to build new manufacturing plants, but expansions may be necessary for some areas. In the past, mergers have failed for many reasons including not knowing the motivations of the buyers and sellers, unrealistic expectations, hidden debt and financial instability, inaccurate financials, lack of communication, poor representation, and putting all eggs in one basket. In order to significantly mitigate these risks, Blue Bird Corporation would have to ensure to make the required investments mentioned prior and learn from the previous mistakes of other failed mergers to ensure those same mistakes are not made.