Bridgewater Castings, Inc.

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Bridgewater Castings, Inc. This haevily disguised case is set in the “nature “woodstoves business in 1986. It is not based on The Vermont Castings Company. The issue is product line strategy based on product line profitability. In early 1986. Tim Morrissey was reviewing the disappointing 1985 results of oprations for his company ( see Exhibit 1). The business had been founded in 1938 by Tim’s grandfather as a modermization of an older iron forge company which Tim’s great- great –grandfather had built up over the years since 1902. The company entered the cast iron wood stove business when that market boomed in the early –1970s.By 1977 wood heating stoves was its only product line. The business oprated out of lesed factory and office…show more content…
I don’s supoose the allocation of SG &A matters much anyway.” Morrissey thinked her for the up – date and walked slowly back to his office. As he studied the resuits. Morrissey thought to hemself : The number really do confirm my intution . the market for stoves is getting so competitive that we just can’t seem to make a profit there in spite of our best efforts. We have tried everything I know and we just keep sliding down further and further. But the crazy wood oven is eal “comer” We ‘ve turned the corner there and things should get better and better. I don’t like to admit defeat. But I really think we should start phasing out of stoves altogethe. If we could’t even break – even in 1985 after all our hard work we are’t ever goning to do it. I always remember the article by Peter Drucker in which he said “ If you can’t make good profit in a product, get out. Focusing on contibution margin is just a trap that will drag you down. You are in business for the long run all costs are relevant. If you can’t cover them, don’t kid yourself .” the secret for getting us back “in the black “ is to capitalize on our great start in wood ovens and throw all our efforts there just like we did with stoves ten years ago. Morrissey callled his Sales Vice President George Murphy, to tell him that he was just about read to “ pull the plug” on stoves.

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