The TURBO Corporation, a consumer electronics company, is engaged in strategic planning for the 1990s for the major functions of the company, including manufacturing, marketing, engineering and R&D accounting and control, personnel and industrial relations, and finance. TURBO has had considerable success in the past, but many of the products on which it built that success have matured, and with more intense price competition, margins have narrowed.
TURBO has maintained a central manufacturing facility, gaining scale economies, and has central technologies in electronics assembly. Many of its products use common activities, such as circuit board manufacture, plastics molding for cabinets and component manufacture as well as the assembly process itself. In order to compete effectively, TURBO has emphasized long runs of items and a stable product mix to spread the set up costs over large numbers of units. The vice president of manufacturing takes great pride in the fact that TURBO is far down the experience curve in many of the basic activities. She feels that cost and controlled quality are the really important priorities at TURBO and that these priorities must be nurtured in the future strategic plans that are developed.
The marketing group at TURBO has been very effective in promoting and selling the company’s products but in recent times, they have found the market to be changing. First there has been heavy price competition for the existing products. Even more disturbing to them is the fact that competitors have been rolling out new products that offer attractive features, providing competition for TURBO’s product line on other bases than price and quality. Customers seem willing to pay higher prices for the new products. On approaching the manufacturing vice president to tool up to produce variations, the marketing vice president has received resistance because of the short runs that would be involved and the increase in the number of items to be produced.
The vice president of engineering and R&D, and the marketing vice-president seem to sing on key, however, both wishing to differentiate the product line with new products. The vice president of engineering and R&D has aggressively recruited well trained electronics engineers on the basis that TURBO would provide them with an exciting environment employing the latest technology and now he wants to put them to work designing new products.
The chief accountant seems neutral on the entire issue. She says that she has a flexible cost accounting system that can accommodate any number of products, as long as she is provided with the budget.
The director of personnel and industrial relations has provided the labor necessary to staff the existing production jobs, which are largely repetitive ones. The company is organized by the AFL – CIO Electrical workers union. Contract negotiations are currently under way, with wages and work rules being prime issues.
The finance vice president runs a tight ROI oriented financial system, demanding that all products or production expansion meet internal hurdle rates derived from a target of 15 percent return on equity for the company. She is more interested in manipulating the target equity return than in the strategies by which it may be achieved.
Strategy for the Future:
The strategic planning committee, made up of CEO, the executive vice president, and the vice presidents, and directors of each of the seven areas already discussed have been presented with studies of the market structure, the industry structure, forecasts of future demand, price trends and positioning in the value added structure of the major competitors by consultants and other experts. Finally, the CEO has summarized what he sees as the wave of the future of the company in the following list of statements, which he characterizes as guidelines to strategy:
1) We must meet well defined customer needs in market segments. This is the most important thing we can do to be successful in the next decade.
2) We must be very responsive to changes in market requirements and to competitive thrusts
3) We must staff and organize to be able to roll out new products at a rate unheard of in this organization
4) Our product quality must be perceived as being the best in the industry, in terms of performance fit and finish and appearance.
5) Manufacturing must develop a high degree of flexibility in order to be able to respond to the need to bring out new products, initially in low volume, but at competitive costs.
6) We must become leaders in the development and use of advanced process technology for automated assembly as well as other appropriate applications of automation.
Organize into teams that mirror the members of the strategic planning committee, with representatives from each of the major functions plus the CEO and executive vice president. Each person should be assigned one of the roles, which should be represented logically but vigorously to discuss positions in order to generate consensus for the four competitive priorities for the manufacturing function.
First the functional area heads have to decide the products to be phased out which are not now a customer attraction. At the same time they must introduce on the product lines new products with usage advantages as well cost competitiveness. The R&D can play a major role in developing the new products attracting present generation customers by their simple operations but more functions.