Precision Worldwide, Inc

Introduction When a competitor develops and introduces a superior product that is less personifyly to manufacture and even more than times usable and durable, the key to people at Precision widely distributed must decide whether to match the competitors product, when to do so, how to wrong or what applyable agonistical advantage it needs to adopt dudoughnut the next strategic period, abandoned that it holds a large inventory of its now inferior product. This issue concerns the vane and pliant sound which the go with, Precision Worldwide, Inc. PWI) is opting to produce as a payoff of competing intensively with a French company, Henri Poulenc, which was at the same time represent a grownup threat to the viability of the poise go PWI is producing. . PWI is confronted non however with a substitute product which is two cheap and durable. Compargond to PWIs brand ring, the flexible peal being produced by Henri Poulenc is both cheaper and lasts longer. PWI is also cl adding the risk of earning the ire of its customers if it manufactures but selectively introduces the cheaper tractile ring in beas where it is faced with the plastic competition.As a result, PWI is now confronted with a dilemma of differences in strategic measures to under ware given the differing opinions of its key people. Questions Posted for this bill 1. You have to analyze the existing data, the conflicting views of the sales manager and the victimisation engineer. And make a termination as to whether PWI should begin the manufacture of a plastic ring. Answer From the standpoint of the qualitative aspect of competition, PWI is encouraged to hold out manufacturing of the plastic ring if it is to avert a more serious sequel of being eased out of the food marketplace referable to a cheaper, more durable plastic ring.Regardless of the fact that PWI still has an inventory of the special(prenominal) brace material and the completed nerve go, yet PWI should approach th e conundrum with a resolve in terms of the qualitative factor of competition. The make up of the existing inventory leave have to be matched with the opportunity damage of being eased out of the competition that is, pitting the income from the substitute with the potential loss of the opportunity income due to a prompt entry into the plastics market. For PWI, the signs of metamorphose atomic number 18 showing the presence of a cheaper and better substitute which should not be ignored totally.Hence, this needs to be seriously considered as a threat. The presence of alternatives as exemplified by Henri Poulenc should encourage PWI to seek this option. 2. In addition, a syllabus needs to be designed as to the pricing constitution to follow for both the steel and the plastic rings. Answer A plan for the pricing policy is similarly considered urgent to seek the opportunities of dismount toll or such exist being at par with the competition, both for the steel and plastic ring s. Any form of pricing policy forget have to be dependent on the cost of production and operations of PWI.Opportunities for cost reductions with outsourcing, reengineering and redundancy layoffs should be seriously considered. Among the avenues that can be explored embarrass outsourcing of the manufacturing of the steel and plastic rings, either with Henri Poulenc or with other as cost-effective firms. A number of plastic or steel rings manufacturer whitethorn offer a cheaper cost organize for PWI. An extra strategy to a pricing policy for the steel and plastic ring is to reengineer the manufacturing operations for the rings to explore ways of reducing production cost to lower the cheat oning price for the part.Part of this operations restructuring measure include evaluation of the sources of tippy materials as means of looking for cheaper suppliers. (Kaplan & Norton, 2004) Comparatively, indeed, the costs of raw materials for both plastic and steel rings are too big to be i gnored. PWI has to take the initiative to explore the use of alternatives like plastic which has been found feasible by Henri Poulenc. On the other hand, the labor and viewgraph cost may be studied in detail to explore automated production to manage the cost-price relationship.Cost variance analysis is ask to determine areas for improvements and opportunities. Pricing policies pass oning then come after localise costing measures are explored. (Garrison & Noreen, 2003) 3. Finally, some considerations should be given to the effect of the decision upon the firms sign in the marketplace. Answer There are a number of considerations that may likely squeeze the image-building processes of PWI are to be seriously considered when making decisions.Thus the effect of decisions involving the following issues is considered (1) the issues involving the cost structure which continue to hamper the pricing policies and market potentials of PWIs products. It appears that PWI has not in realit y looked into the possibility of actively pursuing efforts to compete in the market through cost-effective production processes, lower prices to recognize the availability of better-equality substitutes such as the plastic rings (2) the possible disco very(prenominal) of distributing the planned cheaper plastic rings in areas where competition is tight.This issue might prove to be an idle issue if customers discover such unfair selective distribution escape (3) the disposal of the remaining inventory of special steel and the finished steel rings might not be acceptable to the market unless prices are made more attractive and useful to the buyer. However, disposal made at a cheaper price and the prompt introduction of the plastic rings at a competitive price might mitigate the possible losings of the steel materials and steel rings.This can bring a positive impact in favor of the PWI for its initiative at providing its customers with marked down prices of steel rings. And, (4) the production of plastic rings at a cheaper cost will enable the company to bring a message of dynamism to the market despite the prospect of competition. (Hill, 2008) 4. How long is it prudent to sell a casual highly profitable replacement part without jeopardizing the companys image and market share?Answer The introduction of the plastic rings into the market should be followed by a market survey to determine the acceptability of the market to the unveiling. An analysis of the consumer behavior is important in planning the capture action to be taken on the period required to sell the plastic rings. The survey should be able to tell the effects of the innovation for PWI to assess how long the product can be introduced into the market without impact the image and market share of the company.5. What price relationship is likely to obtain between the steel rings and the plastic rings once the last mentioned become widespread? Answer The price relationship expected to flow between the steel rings and the plastic rings might at a ratio of 51 which means that five plastic rings is equivalent to one steel ring. This relationship however, can importantly change as the cost structure is reevaluated and inputs analyzed to arrive at a more competitive cost structure enough to sustain the production of both the steel and the plastic rings. . How should the 15,100 finished steel rings that will still be on hand in kinfolk be treated for analytical purposes? Answer The inventory of finished steel rings will be used up in due time by September based on estimates of periodic and unremitting consumption. The remaining inventory can be classified at atom and marked down accordingly to encourage sales and turnover. 7. go out the price rings hold at $1,350 once plastic rings are introduced? Answer The price will no longer hold at $1,350 for the steel rings.The price of the traditional steel rings will nightfall accordingly due to the presence of substitutes and the dema nd to become more competitive. 8. Will the price of steel rings fall to one-fourth of the plastic rings price? Answer It is probable that the price of the steel rings will fall to one-fourth or even beyond as components of the cost become stable, but there are still variables to consider that may affect the pricing that is, the issue of reengineering the production which may lead to lower costs.9. What effects will the decision in respect to plastic rings and steel rings have on the sale of other PWI products?especially of the industrial machines? Answer Since the pricing policy of PWI will affect the options to be made by the company, the effect of decisions on the plastic and steel rings may rationalize the prices of the machines as the cost burden is shifted from the steel to the plastic area. (Garrison & Noreen 2003) 10. Can the plastic rings be sold in France without affecting PWIs other markets? Answer At the short run, there will be no effect.However, in the long run, when c ustomers are able to encourage access to the French market through the globalization phenomenon, customers will scratching to shift sourcing of rings from the traditional sources to France where are able to make adept use of their financial resources. 11. What action should Hans Thorborg take? Why? Answer Thorborg should explore existing and future capabilities to arrive at the various options. Here, the bottom post is the capability to produce the plastic rings at a competitive price while disposing the inventory of steel materials and the steel rings.Thorborg needs to lower retooling the production lines for the plastic rings. The threat from Henri Poulenc is real and may soon take some market share from PWI. The cost structure is a very fluid support for decisions as these can significantly change with a decision to outsource, reengineer or rationalize the labor and overhead component. Whatever options Thorborg drive to act on, needs the support of his key people in the com pany especially Henk and Eisenbach. (Anthony & Govindarajan, 2003)