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Appliance Maker the Challenge

Good Essays

Case 1: Appliance maker
The challenge
Senior executives at a large, low-cost manufacturer of appliances and white goods were concerned about the sluggish performance of the company’s household fan business. It had long been among the top leading players in the company’s home country—an emerging market—but was now losing domestic share in two important, and fiercely competitive, product categories.
The company’s leaders suspected that a stagnant product portfolio was partly to blame; they had been focusing a considerable amount of attention on operations and had neglected to revisit fan designs for a couple of years. Meanwhile, an innovative upstart, also from an emerging market, had begun competing with the manufacturer, both at home …show more content…

Yet the teardown showed that as compared with competitors, the company was “overbuilding” its products significantly and that identical—or even better—product performance was possible at a lower cost if the team was willing to rethink its design approaches.
Some of the resulting design changes were quite straightforward and even, in retrospect, obvious. Yet the team acknowledged that the new ideas didn’t click until the teardown, when the evidence was spread out on the table for discussion. By modifying the cover of one type of household fan, for example, the team made it unnecessary to include an internal bracket assembly that had supported the original cover—a savings of 7 percent per unit. This change, like most cost-saving opportunities the team identified, was invisible to customers and didn’t matter to them (for an example of one model, see diagram).

Many of the individual cost-saving opportunities the team identified were small. But the collective impact was huge—helping the company to reduce the total cost of manufacturing its fans by more than 10 percent, against a cost base that was already quite competitive. Meanwhile, consumers received the new designs well, and that contributed to a 50 percent jump in operating profit in the first year of their introduction and helped elevate the company to the number two spot in the market (up from number three) over that time span.

Focus on the customer
To get more information, the company’s marketing

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