Operation Management

Firm Analysis

Wienerbeger are willing to take risk to invest in foreign markets, it involves:

i) Stability of the financial structure or Financial capacity that developed in home markets. High initial investment and generates stable cash flow. Lead to secure market share via strong financial, easier play a role in "M&A- game" in the industry (high cash flow). Currently Wienerberger require roughly 60% of depreciation for maintenance capex. This leads to high free cash flows that can be used for dividends, growth projects, debt reduction or share buybacks. Continuously new technology (R&D) invented deters entry by medium-sized firm.

ii) Human resource/capacity (managers) contributed to achieve efficiency in new plants, i.e. strong product and process know-how, learning experience and results in economies of scope, deserves closer examination.

iii) Efficient supply on the firm level. The larger the firm, the higher the return on technology, since brick production sites are similar everywhere

Competitive Advantage

1. Standardize product (homogenous) and Quality, in which innovatory shift occurs, the product can be produced by the new standard anywhere in the world.

2. To gain economics of scope. The product is relatively cheap, a high input in technology pays only if this technology is used as often as possible (economics of scope).

3. Funding of large real investment which cannot be provided by family enterprises and a cost-effectiveness in the production of high-quality, innovative products with new technologies.

Q2. What other strategic options did the company have? Describe each fully and justify your choice as the most appropriate options.

To establish and expand leading positions in all markets, and expand step by step into new and promising markets via Acquisitions Strategy required.

Acquisitions or the construction of new plants, which can be integrated into existing activities. They are highly profitable because of the opportunities for synergy, and company have set ambitious targets for this area - cash flow return on investment (CFROI) of at least 22% within two to three years after the start of investment.

Acquisition of competitors with sizeable market shares or the entry into new markets. The hurdle rate for such activities is a minimum CFROI of 16%, improving the earning power of the Group, which currently generates a CFROI of 12.9%. If free cash flow after dividends