PART 1

GPPE (Geoscopic Protective Prototype Equipment) Pty Ltd opened in 2005 in NSW under the leadership ofthe Managing Director, Leigh Baker. Leigh was one of just two Directors for GPPE, owning a controlling 51%share. GPPE's Mission Statement was to 'To maintain safety of all deep-water infrastructure throughleadership in exploration and research, industry accreditation, and infrastructure maintenance.'

GPPE provides high-grade underwater Geoscoping inspection and reports through remotely operated robots(ROVs) or unmanned underwater vehicles (UUVs). The robots and vehicles are specifically designed tooperate underwater at depths of up to 150 meters, withstanding water pressure and temperatures. Therobots, essentially underwater drones, are designed to navigate infrastructure (pipes, concrete, cables,joints, tunnels etc.) to record images of the infrastructure and transmit those images back to the companyalong with the exact location through satellite mapping. GPPE provide equipment for hire to governments,armed forces and other enterprises involved in the maintenance of underwater infrastructure.

Most of the specialised equipment is constructed within GPPE but it sources 80% of the parts from overseasmanufacturers. In total, 60% of the parts are sourced from the German company, IPS (InternationalProtection Supplies) and 20% from other suppliers across the globe, and from one company in India, IAL(Infrastructure Association Limited). GPPE has plans to add their own manufacturing arm to their business,to enable them to build those parts they currently purchase overseas.

However, a favourable compliance requirement is that only GPPE's own qualified technicians can operatetheir equipment, and although there are other businesses with comparable products, GPPE owns andmanages the only industry recognised and accredited qualification program with which it offers nationallythrough several partner organisations. Only GPPE can issue the qualification which is recognised acrossAustralia and it is gaining recognition from the UK and some European countries. Every year, GPPE contributeto the World Conference on ROVs and through that involvement they are receiving many more companiesasking for their skilled training.From the accreditation and training program, GPPE make well over $100,000per year in course fees (inclusive of a percentage paid to each partner organisation) and have very littleoutlays for that profit.

Early 2007, the company experienced exceptional growth through many municipal councils utilising theirsystems and GPPE also secured a five-year multimillion-dollar NSW State Government tender to provideongoing inspections of all underwater infrastructure including bridge footings, drilling rigs, pipelines, marineinfrastructure, underwater tunnels and more.

By mid-2007, Leigh Baker and his business partner decided that a strategic move would be to increase the

business operations nationally, with the possibility for international growth at a later stage. So, near the endof 2008, GPPE had subsidiaries in every state in Australia with assets worth over 15 million dollars and over400 staff.

In 2009, GPPE decided to offer 50 shares to further increase its assets and opportunities for above averagereturns for shareholders. The company notified ASIC of its intention and delivered the 50 shares to the marketat a viable price indicative of the expected return on investment. The shares sold and have since beenincreasing in value. GPPE may consider altering its company structure in the future to be able to offer moreshares.GPPE continued to perform both locally and nationally and was able to compete and provide itscustomers with more services at a lower price than its competitors.

January 2010, after evaluating the demographic segment and the industry environment, GPPE decided tovertically and backwardly integrate their business by acquiring the Indian manufacturing business IAL(Infrastructure Association Limited) with the purpose of continuing to produce their parts through thatacquisition. The 8-million-dollar acquisition of IAL was approved by the local authorities and GPPE took overproduction of the ROV and UUV parts. GPPE operated IAL as a decentralised entity, utilising the corecompetencies and resources and ensuring the local market was not disrupted. At the same time GPPE wasundertaking due diligence for another small manufacturer of parts within Thailand with a possible takeoverbid being considered.

Using the existing manufacturing processes of their IAL acquisition, GPPE diversified their products,manufacturing small hand-held and large industrial drones. The drones were shipped back to Australia withpurchases from farms, sporting arenas and local council road inspections, and other services.Within 12months, GPPE's drone manufacturing output was earning almost double the cost of purchasing their partsfrom IPS for building their ROVs and UUVs.

After only 5 years, GPPE was performing very well with an increased portfolio of businesses and a possiblemulti-domestic strategy on the horizon.

PART 2

January 2011, the German company, IPS (International Protection Services) opened three wholly ownedsubsidiaries in NSW, WA and Victoria, offering the German precision manufacturing of both ROV and UUVparts and built ROVs and UUVs, along with a newly formed maintenance service department. IPS sold itsitems to over 1000 businesses across the world.

GPPE was unaware of the intention of IPS to invest in Australia by opening subsidiaries in three states andby May 2011 GPPE's sales of ROVs and UUVs had decreased considerably through competitive pricing by IPS.

GPPE's purchasing agreement with IPS also lapsed in April 2011, with IPS refusing to renegotiate the termsof purchase, and instead increasing the purchase price of its parts by double.

GPPE were suddenly placed in uncertain waters with regards to their ROV and UUV operations, however thedrone business was stable despite a number of new entrants to the market (GPPE was able to manufacturethe drones cheaper and at less cost than others within the industry).

However, with IPS entering the Australian market and the loss of their purchasing agreement, Leigh and hisbusiness partner, and shareholders, had planned an emergency meeting.

We have to Answer the questions below from this case study.

QUESTIONS

1.At what point do you think that GPPE made an error of strategy?

o Explain in terms of what happened

o Describe what you would have done?

2. Can GPPE recover from the downturn and newly competitive environment?

o If yes, how? What would you do?

3. If you were a business consultant - what would you advise the Directors of GPPE to do now?

We have to answer these question from the case study provided below. the case study provided.