Husky Injections Molding System Case Solution
The company should rather focus on making investments in the Advanced Manufacturing Centre, which would enable it to develop efficient technologies. Moreover, the company’s machinery is quite efficient as compared to other competitors’ machineries. Husky’s systems are quite cost efficientas they are designed to reduce the cost and resources of the customers. The company needs to provide training to the sales personnel, who would then be able to communicate to the customers about the potential benefits being provided by the Husky’s systems in comparison to other competitors. The company’s products are although expensive, but they are designed to provide long term cost savings to the customers. So, the company should not focuson changing its strategy and rather focus on the expansion of its strategy through adopting few measures,which are discussed in the later section.
Numerical Analysis- Premium Price
In order to understand the reason behind the company charging a premium price from its customers; a willingness to pay analysis has been conducted for both the thin wall and the preform systems manufactured by Husky. Appendix 1 shows the detailed willingness to pay analysis for both the systems.
Thin Wall Systems
The thin wall systems can mould 16 margarine containers in 6 second, i.e. the thin wall systems by Husky can complete one production cycle of 16 margarine containers in 6 seconds.However, the thin wall system by competitors can complete on the production cycle of 16 margarine containers in 7 seconds. The production per second is determined by dividing the cycle production with the number of seconds it takes for the system to complete a cycle. The premium efficiency multiplier of 1.17 as compared to competitor shows that Husky has a higher efficiency in production, as it saves the time required to complete one production cycle. In addition, resource utilization efficiency of Husky’s thin wall system has been determined as well.
The efficiency of Husky’s thin wall system is found by determining the input utilization premium multiplier. The numeric shows that the Husky’s thin wall system has a higher efficiency in input utilization as compared to its competitors. The increased efficiency is multiplied by the current price of the Husky’s thin wall system, which shows that the company can charge a premium price of up to $466,667 for its system. It is because the company’s system is more efficient in terms of production and input utilization, and the customers are willing to pay a higher price for it.
The efficiency is also compared between the Husky’s preform system and that of the competitors’. It can be observed that the preforms prepared by Husky and the competitors’ machine are 48 per cycle. However, it take lessseconds for Husky’s machine to complete one cycle, which is10.4 seconds ; whereas, its competitor takes 11.8 seconds. The premium efficiency multiplier of 1.13 as compared to its competitor, shows that Husky has a higher efficiency in production, as it saves the time required to complete one production cycle.
Similarly, the efficiency of Husky’s preform system is observed by determining the input utilization premium multiplier. The numeric shows that Husky’s thin wall system has a higher efficiency in input utilization as compared to its competitors.The increased efficiency is multiplied by the current price of Husky’s thin wall system, which shows that the company can charge a premium price of up to$1,361,538.46 for its system. The company can charge such price due to its system being more efficient in terms of production and input utilization.
The company may adopt the following strategic recommendations, in order to maintain its traditional markets and competitive advantage:
Broadening Product Line
As mentioned earlier, the competitors have entered the industry with similar products at lower prices;thereby snatching those customers who have low product price preferences.Husky can maintain its market share by launching another low priced product line which should be especially designed for price conscious customers. This strategy is expected to increase the company’s market share by increasing the number of customers and the company’s profitability. However, this strategy might have a negative impact on the existing premium priced product line as the customers might shift towards the new product line which would have a lower price.
To maintain a sustainable competitive advantage; the company needs to achieve an economies of scale, which would ultimately result in cost cutting. The company achieves economies of scale by investing in the Advanced Manufacturing Centre, which enable the company to develop efficient technologies. This would be a onetime cost but it would enable the company to become more cost effective as compared to other competitors, and would help the company in generating more profitability.
Sales Force Training
This strategy is very crucial, as sales force are the key personnel who have a direction interaction with the company’s customers. As highlighted in Appendix 1; the company offers an efficient production system as compared to its competitors, and the customersare more than willing to pay for high quality and efficient products, which reduces the costandresources. However, the customers need be informed about the attributes and efficiencies offered by Husky’s systems. This information can only be provided by the sales force personnel. This is why the company needs to provide a proper training to its sales force. This strategy would generate more sales and profitability for the company. The company would incur a training cost, but it would be worth it for the company to invest in its training.
Conclusion & Recommendation
Husky has created a niche market, whereby the company offers high quality systems at premium prices. The detailed analysis revelsthat Husky’s system is worth paying premiums for, as the system reduces the time, resources and cost for the clients. However, to deal with the tough competition and the threat of new entrants; the company is recommended to focus on its cost cutting strategy with the installment of AMC and training of its sales to communicate the benefits provided by the Husky’s products and services to the customers. It would resolve the challenges being faced by the company in terms of its lost market share and threats which it faces in sustaining its profitability……………………….
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