GPS-to-GO Takes On Garmin Case Analysis
Central Problem
The case study highlights the challenges faced by GPS-to-Go, a Global GPS’s subsidiary when venturing into consumer GPS market. GPS-to-Go had already succeeded in creating complex GPS systems for air traffic and logistic. The company’s management led by Michael Scott now wanted it to venture into the consumer GPS market by developing new products including GO I GPS, GO II GPS, and GO III GPS. The management was optimistic that the company could outdo the well-established competitors in this market due to a vast portfolio of patents from Global GPS, its parent company. Nonetheless, the greatest challenge that GPS-to-Go had to overcome so as to succeed in entering the GPS consumer market was the high unit manufacturing cost. Thus, this was the key issue that this company was facing in its attempt to venture into the GPS consumer market. The initial GPS product to be developed, GO I GPS was above the target cost. As reported in the case, the leading cost drivers for this products were the labor dollars needed to carry out product testing as well as the parts cost. The company’s vice-president for operations, Joseph Thomas was even doubtful of whether the design was carried out due to the high unit manufacturing cost.
Analysis of Situation
The central problem that the company was facing can be understood well with the help of a SWOT analysis. Ideally, this tool can help us understand both the internal and external factors that affected GPS-to-Go Company. One of the strengths of this company was its success in the development of GPS systems for air traffic control and logistic. In essence, this success is what made the company’s management consider venturing into the consumer GPS market. Besides, the company’s products were already well-known thanks to their unique features. Pallittere (2009) claims that the company could command a premium for both the exceptional and plentiful features that its GPS systems would include. What is more, GPS-to-Go had hardworking teams. In fact, Pallittere (2009) claims that working hard was not new for the company’s teams. Nevertheless, GPS-to-Go had some weaknesses. One of these weaknesses was its failure to drive the GPS products toward their target cost. Consequently, this means that the company could not be profitable in the highly competitive consumer market. Additionally, the company’s design for the new GPS products was poor. In essence, this poor design was blamed for the high unit manufacturing cost.
Regarding the opportunities, the company could exploit the growing demand for the GPS products in the consumer market. GPS-to-Go also had the opportunity to become the leading player in the consumer GPS market due to its parent company’s patented technology, strong financial position, and engineering experience. GPS-to-Go also had the opportunity to continue flourishing due to its bright experts and researchers. In essence, the company had already prospered thanks to its wealth of brilliant specialists and researchers. They had produced cutting-edge global positioning systems for both complex logistics as well as air-traffic control systems, thus, placing the company on top of the competition. The market growth for the GPSs was also promising. The greatest threat that was facing the company was the intense competition. The company’s biggest competitors were Megallan, TomTom, and Garmin. The other threat facing the company was the increasing costs of raw materials. In fact, these costs were beyond GPS-to-Go’s control. The high unit manufacturing cost was as a result of rising costs of acquiring the raw materials.
Alternative Strategies
GPS-to-Go should have coped with the problem of high unit manufacturing cost by adopting some strategies. In particular, the company ought to have coped with this problem by spending less in manufacturing and producing more GPS products for the consumer market.
Cost reduction strategies
The company should have found ways of utilizing few resources to produce the same number of GPS products. The cost reduction strategies would have helped the company cut the unit manufacturing cost significantly. Besides, these strategies could have improved the profitability of the company. However, these strategies would have discouraged innovation within the company. The strategies that the company should have adopted to reduce the unit manufacturing cost are reducing the labor costs as well as reducing the raw materials and overhead costs.
Reducing labor cost
Specifically, the company should have spent less in manufacturing by reducing the cost of labor. As Pallittere (2009) reports, one of the main drivers for the high unit manufacturing cost was the labor cost. The company should have reduced this cost by making its employees more efficient. Besides, it should have offered its workforces specialized training programs to make them work at a quick pace. In essence, this would have reduced the time needed to manufacture the GPS products and help in cutting the labor costs.
Reducing raw materials and overhead cost
GPS-to-Go should have also coped with the problem of high unit manufacturing cost by reducing both the material and overhead costs. In an attempt to reduce the raw material costs, the company should have deployed lean manufacturing initiatives. Ideally, these initiatives could have helped the company reduce the costs associated with the raw materials by eliminating their wastage. GPS-to-Go’s management should have cut the expenses related to running the company through monitoring and controlling them.
Strategies for manufacturing more using the same resources
GPS-to-Go should have found best approaches to facilitate the production of additional GPS products using the same production resources. These practices include taking advantage of the engineering experience of its parent company and implementing an ongoing improvement approach. The company should have exploited the engineering experience of its parent company to increase the GPS products manufactured. In essence, this could have helped the company avoid the problem of poor design and ultimately decrease the high unit manufacturing cost. The adoption of an ongoing improvement approach could have helped the company find ways to enhance its production of the GPS products for the consumer market. Nonetheless, this practice would increase the overhead costs for the company.
Soren Chemical Case Analysis
Central Problem
The case study is about the challenges that Soren Chemical faced in launching a new product, Coracle into the consumer market. The company had manufactured this new water clarifier to be used by the consumers in their small household and recreational swimming pools. Soren Chemical was recognized for its Kailan MW, which as Rangan & Yong (2010) describe, was a water clarifier used by the customers who had large recreational water park facilities. It manufactured Coracle since Kailan MW could not be used in residential pools and other small pools with a small number of swimmers. Consequently, the main challenge that Soren Chemical faced was low sales of its new product, Coracle. In other words, the central problem presented in this case is product launch fail.
Unlike the Kailan MW, which had performed well in the market, Coracle did not perform as anticipated. The company had expected to sell 50,000 gallons during the first year as Rangan & Yong (2010) reports, but this was not the case. In particular, the consumers were not aware of the value of this new product. The survey carried out by Moritz disclosed that the majority of the specialty retailers and service professionals were not aware of the new product. Besides, the majority of the distributors had not supported this product. According to Rangan & Yong (2010), about 70 percent of the respondents reported that their distributors had not offered Coracle to them
Analysis of Situation
Despite failing in product launch, Soren Chemical had some strengths. First of all, it had already established itself well in the industry. In essence, Soren Chemical was a highly recognized brand thanks to its unique products for commercial pools such as Kailan MW. According to Rangan & Yong (2010), the company’s product line in 2006 comprised more than 350 products. Essentially, this implies that Soren Chemical had established itself well in the market. The other strength of the company was its high-quality product, Kailan MW. According to Rangan & Yong (2010), one gallon of this water qualifier could treat about 500,000 gallons of water effectively. The company boasted of this product.
Nevertheless, the company had some weaknesses. One of these weaknesses was product launch fail. Despite being a high-quality product, Coracle did not perform well in the market. Soren Company had anticipated making $1.5 million in Coracle sales by the end of the first year, but this did not happen as it only made $111,000 (Rangan & Yong, 2010). The other weakness of Soren Chemical was the high price it charged for Coracle. Compared to the competitors’ products, Coracle was priced quite higher. Also, Soren Chemical was weak in marketing the consumer-oriented products, and this was the reason Coracle did not perform well. Furthermore, the company was also unable to attract retailers and distributors for its new product.
The company had numerous opportunities. The market for Coracle was very promising. The number of residential swimming in the United States was high. Thus, this presented a good opportunity for the company to prosper. The company also had a good opportunity to develop additional cost saving products and outdo the competition. One of the threats that faced Soren Chemical was fierce competition from the leading business rivals including Jackson Laboratories, Kymera, and Keystone Chemicals. These competitors had a significant market share in the residential pool clarifier market, a market where Soren Chemicals was performing poorly. What is more, the highly fragmented consumer market presented an immense threat to Soren Chemical.
Alternative Strategies
Penetration Pricing Strategy
Soren Chemical should have coped with the problem of product launch fail by implementing the penetration price strategy. Many companies usually use the penetration pricing strategy when launching new products. Instead of charging its Coracle at a high price, Soren Chemical should have initially set a low price to attract new consumers and ultimately increase the price after gaining a considerable market share. The low price could have made the customers switch to the company’s new product. As a matter of fact, the adoption of penetration pricing strategy could have helped Soren Chemical in various ways. Specifically, this strategy could have helped the company create customer base immediately after the launch of the product due to the low price and eventually increase its market share. As a result, the company could have succeeded in launching the new product. Additionally, the penetration strategy could have helped the company outdo the competition and succeed in launching the product. However, the adoption of this strategy could have made the company sacrifice making the profit when launching the product. What is more, the penetration strategy could have created false customer loyalty.
Push Promotional Strategy
The company could have also used a push promotional strategy to cope with the problem of product launch fail. Specifically, the company should have endeavored to put the new products in the minds of the consumers through attention-grabbing messages and big advertisements. Ideally, this strategy could have helped the company create the demand for its new product through promotion. Soren Chemical should have sold the new product directly to the customers through trade shows and point of sale displays to demonstrates its value and features. In point of fact, this strategy could have helped Soren Chemical introduce its Coracle in the consumer market easily. Nonetheless, the company could have spent a lot of resources to implement this strategy.
References
Pallittere, D. A. (2009). GPS-To-Go Takes on Garmin. Richard Ivey School of Business.
Rangan V.K. & Yong S. (2010). Soren Chemical: Why is the new swimming pool product swimming? Harvard Business School.
