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Adam Burke And Pbm Plastics: Message In A Bottle Case Solution & Answer

Adam Burke And Pbm Plastics: Message In A Bottle Case Solution 

Question 1

PBM’s business-level strategy is to reduce the cost of production, so that the company could offer lower prices in order to maintain its competitive edge in the market. Along with that, Bruke was also considering to undergo a business expansion in the market. PBM’s business-level strategy was simple and straight, i.e. providing value to the consumer-sin order have its competitive edge maintained. A study concluded that the company should use low-cost strategy to sustain its competitive advantage (Hill, 1988). The goal of the company is to offer low price products and a wide range of products for potential consumers. Low-cost strategy allows the companies to reduce their products’ prices, because this helps them in achieving the market share and increasing the demand for their products (Monash, 2020).

Low-cost Strategy and Bruke Role

PBM’s goal was to reduce the production cost in order to sustain itself amidst an intense competition in the market.Low-cost strategy means delivering the products or services to maintain low prices, through which companies lower their costs through standardized business operations.(Walker and Ruekert 1987). Bruke maintained the business operations to support the business strategy. When Bruke started his business; plastic’s prices were not reliable and the company was paying more than the average charges. According to the business analysis of Bruke; he estimated that the company should get the plastic at $0.85/lb.(Adam Bruke And PBM Plastics , 2013).  Bruke had two options, one was to negotiate the prices and another to increase the profit per pound to cover the cost. Bruke used the strategy of reducing the defect rate and waste management so that company could negotiate on the plastic’s price. So, after exploring numerous options; Bruke decided to outsource the bottles and he contracted the suppliers to deliver the bottles along with caps, nipples and tops at $0.50/lb. This is how Bruke solved the company’s cost incurred issue.As a study concluded that the leaders or managers play an important role in a business’s development and effective strategy development (Montgomery, 2012).

Question 2

Vertical integration

PBMwanted to achieve a low-cost strategy so that it could meets its business objectives. . The company used vertical integration to reduce its cost, as it is mentioned in the case that Bridgehead discussed regarding vertical integration to Spar-pack. Bruke sold out the baby bottle unit line, but he had also discussed on an integration to reduce the overall products’ cost of the company(Adam Bruke And PBM Plastics , 2013).A study concluded that vertical integration helps the companies in increasing their profit generations and it also helps in obtaining bargaining power (Riordan, 2008). Whereas, another study stated that vertical integration allows the companies to increase their market position, especially when the companies use their own downstream to achieve competitive edge. (Rey and Tirole, 2007). In this case, it is mentioned that Bruke was in a contract with the previous company, which reflected the vertical integration of the company. All the business strategies were linked with the ultimate business goals.

Diversification

The company wanted to expand its business and diversify its product units. The company was using diversified products to have diversified skills, technology and knowledge.As the company was involved in production and suppliers’ management;it was dealing with various product lines to manage the diversification. PBM was using a diversified business portfolio to utilize the resources efficiently,as diversification helps in achieving efficiency, creation of more investment opportunities and in achieving economies of scale (Sindhu et al., 2014). Along with that, the company had also opted for diversification in order to get to a better position in the industry and to utilize it excessive resources (Shyu & Chen, 2009). But diversification also tends to pose several challenges to the company’s performance, especially if the company chooses to diversify through expansion………………..

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