Read Bradley & Mahmood, "Bombardier TEG" case and Summarize the salient changes in his market and competition during the time of the case;
Critique the "threat" of Morrison Knudsen;
Perform a thoughtful analysis of the expected risks and returns of a few strategic options and make a recommendation.
Be sure to evaluate the desirability of Exiting the US market quickly;
Staying the course but changing strategy;
Staying the course largely as a waiting game, with perhaps minor strategic adjustments.
Case..
It was an unusually sultry day in June 1993 as Jean-Yves Leblanc, president of Bombardier's Transportation Equipment Group (1'EG) for North America, met with his management team at TEG's Montreal suburban offices to prepare for the August strategic orientation session. Present at the August meeting would be Chairman and CEO Laurent Beaudoin, COO Raymond Royer, and other senior managers. At the helm since 1966, Beaudoin had engineered a successful diversification of the company and was known for his bold and deliberate approach. Leblanc was preparing to review his group's performance on bids for passenger railcar manufacturing contracts in 1992 and define its strategic options. Bombardier was one of Canada's largest manufacturers, with six operating groups, active in three main industrial sectors-aerospace, transportation equipment, and motorized consumer products. Its sales in 1992 were $4.4 billion and net income was $133 million-a 45% and 23% increase over 1991, respectively. However, the past year had not been a good one for TEG. It had lost four key contracts in the United States to Morrison Knudsen, an engineering and construction firm, which had diversified into railcar manufacturing in 1989. Promoting itself as the only US. passenger railcar manufacturer and advancing bids on average 7% lower than its competitors', Morrison Knudsen had racked up nearly $1 billion in new railcar orders-$650 million in 1992 alone. Bombardier, in passenger railcar manufacturing since the late 1970s and the market leader with a strong reputation for the quality and technology of its products, had watched its market share slide 10 points in two years to the current 32%. Morrison Knudsen's swift success had rocked Bombardier and prompted many insiders to wonder whether the American company had discovered a new approach to the business that had substantially lowered its costs and given it a sustainable advantage in winning bids. lf so, how should Bombardier respond to the challenge Morrison Knudsen now posed? Should it respond aggressively by cutting its price? U so, from where could it extract costs, reduce margins, and still improve financial performance? Should it rethink its asset deployment in the United States? Or was it time, Leblanc wondered, for a new approach to this market altogether?.................