Chapter 3 is about analyzing Core Competencies and the Value Chain to determine Strengths and Weaknesses of the organization.

For this assignment, the same case and the internet answer the following:

• What is Sturm, Ruger's tangible and intangible resources?
• How do these resources get teamed together to form capabilities?
• Which of Sturm, Ruger's capabilities are Core Competencies?
• Where in the value chain does Sturm, Ruger create value? Are there any weaknesses in the value chain?

Company Overview with Project HomeSafe to deliver gun safety materi- Today, Sturm, Ruger & Company ("Ruger") is principally als and cable locks to inner city gun owners who may engaged in the design, manufacture, and sale of firearms not otherwise have access to the needed gun safety to domestic customers. Since 1990, Ruger has been pub- materials." However, these types of programs are some- licly traded on the New York Stock Exchange under times met with skepticism. As Ruger has stated in its the stock ticker RGR. The company operates with two Ruger Red Book-Firearms Ownership in America- distinct business segments: Firearms and Investment Our Responsibility for the Future: Castings. The Firearms segment offers products in three "Firearms safety education can and has demonstrably industry product categories: rifles, pistols, and revolvers. reduced needless accidents with firearms, particularly There are several available models within each product among younger persons. Yet, any suggestion of such a category, each of which varies based on caliber, finish, widespread educational program is immediately met barrel length, and other features. Under the Investment with the response that it is actually 'promoting guns." Casting segment, the company manufactures and sells If we took this attitude toward sex and drug education investment castings made from steel alloys and metal programs, we would be accused of being naive and injection molding parts for internal use in the firearms immature."12 segment, with minimal sales to outside customers. In 2016, investment castings represented merely 1% of total sales. The majority of Ruger sales are domestic, Management with exports accounting for only 3%. As of 2017, Ruger Ruger has a very seasoned and talented top manage- employed approximately 2,110 full-time employees. In ment team. Ruger's CEO, Christopher Killoy, was pre- addition to the full-time employees, Ruger employed viously the President and Chief Operating Officer of roughly 320 temporary employees to supplement its Ruger, and has been employed by Ruger in some capac- workforce.? ity since 2006. Killoy was also involved in the gun and ammunition manufacturing field before joining Ruger, Vision as the Vice President of Sales and Marketing at Smith & From its start in 1949, Ruger has lived up to its motto of Wesson. Killoy offers experience to Ruger, both as a sea- being an "arms maker for responsible citizens" and has soned veteran in the gun and ammunition manufacture ing business, and through his membership on the Board strived to achieve its vision: of Directors of the Sporting Arms and Ammunition "Sturm, Ruger & Co., Inc. is one of the nation's leading Manufacturing Institute and the International Hunter manufacturers of rugged, reliable firearms for the com- Education Association Foundation. Killoy served in the mercial sporting market. The only full-line manufacturer United States Army Armor division. of American-made firearms, Ruger offers consumers over Mark Lang has served as Ruger's Group Vice 400 variations of more than 30 product lines. For more than President since February 18, 2008. He arrived with con- 60 years, Ruger has been a model of corporate and commu- siderable business experience, having previously served nity responsibility." as the President of the Custom Products Division for Mueller Industries, as well as a manufacturing execu- Consistent with its emphasis on community respon tive with Thomas & Betts, Black & Decker, and General sibility, many advertisements focus on the importance Electric. of being a safe gun owner, while safety messages are Thomas Dineen has a longstanding history with posted on the Ruger website. Ruger believes in and the company, joining Ruger in 1997 as a Manager of invests in educational programs emphasizing safe Corporate Accounting. He worked as an Assistant gun ownership and gun use, knowing that this edu- Controller from 2001 to 2003 before being promoted to cation has the potential to save lives." The company Treasurer and CFO in 2003. Dineen was promoted to has dedicated materials and other resources to the Vice President and CFO on May 24, 2006. promotion of gun safety to all gun owners, including Thomas Sullivan was hired as the Vice President through youth programs. Each Ruger gun is designed of Newport and Mayodan Operations and Pine Tree with safety in mind by incorporating both internal and Castings on August 14, 2006, after previously serving as external safety measures. Recently, Ruger partnered the Manufacturing Executive at IMI Norgren, Rexnord,and TRW Automotive. Sullivan brings extensive knowl- Exhibit 1 Sturm, Ruger & Co, Inc. Board of Directors edge of supply chain operations, manufacturing, and product development to Ruger. He has demonstrated C. Michael Jacobi, Chairman-Mr. Jacobi has served on the a continued dedication to education as a student and Board since June of 2006. He is President of Stable House 1, LLC, teacher of the Toyota Production System for the last a private company that specializes in real estate development. Jacobi is a Certified Public Accountant and brings considerable fifteen years. audit experience to the Board of Directors. Kevin Reid started with Ruger in July 2001 as John A. Cosentino, Jr., Vice Chairman-Mr. Casentino is a Assistant General Counsel. From there he was pro- founding partner of the Ironwood Manufacturing Fund and has moted to Director of Marketing in June of 2007. As served on the Board since August 2005. He has considerable the Director of Marketing, Reid not only oversaw experience as a manufacturing executive and leading several daily marketing activities, but he also successfully led private investments. two highly anticipated product launches. On April 23, Michael O. Fifer-Mr. Fifer served as the CEO from September, 2008 the Board of Directors elected Reid to serve in 2006 to May, 2017 and has been an active member of the his current position of Vice President and General Board since 2006. He possesses considerable industry experience from his tenure. Fifer earned a BS in Physics from Counsel. Reid served in the United States Marine the United States Naval Academy, an MBA from Harvard Corps from 1980-1984. Business School, and served as a submarine officer in the Shawn Leska has a longstanding history with Ruger, United States Navy. starting with the company in 1989 as an Accounting Sandra S. Froman-Ms. Froman has been an active member Office Assistant. He climbed the ranks of the organiza- of the National Rifle Association since 1992. She served as Vice tion and was promoted to Director of Sales in November President from 1998 to 2005 and as President of the NRA from of 2011. As Director of Sales he worked through sev- 2005 to 2007. Ms. Froman has a BS in Economics from Stanford University and a JD from Harvard Law School. She currently eral new product launches and was involved in sales practices as a private civil attorney for her own firm. programs and corporate initiatives. In his twenty-nine Terrence G. O'Connor-Mr. O'connor joined the Board with years with Ruger, Leska has developed strong industry considerable financial and audit experience. He currently serves relationships. on the Nominating and Corporate Governance Committee and Background information for the Ruger Board of helps drive strategy for Ruger as a member of the Risk Oversight Directors is included in Exhibit 1. Committee. He received a Mechanical Engineering degree from the Imperial College in London. Operations Amir P. Rosenthal-Mr. Rosenthal has been on the Board since 2010. He was Chief Financial Officer of Performance Sturm, Ruger & Co. is headquartered in Southport, Sports Group, LTD. for seven years and is a current Director Connecticut, and maintains manufacturing facilities at Ruger. in Newport (New Hampshire), Prescott (Arizona), Ronald C. Whitaker-Mr. Whitaker has served on the Board Mayodan (North Carolina), and Earth City, Missouri. since 2006. He retired from Hyco International after serving as The Newport facility is the largest, at 350,000 square the organization's CEO from 2003 to 2011. feet, and is the only facility that manufactures both fire- Phillip C. Widman-Mr. Widman is a current director at Ruger arms and castings. The Prescott and Mayodan facilities and has served on the Board since January of 2010. His expe sit at 230,000 and 220,000 square feet respectively and rience includes years of financial roles, CFO of Philip Service manufacture only firearms. Finally, the Earth City facil- Corporation, and work as an independent consultant. ity is the smallest, with only 35,000 square feet, and man- Source: Sturm, Ruger & Company, Inc. Board of directors & corporate officers. ufactures only castings." http:/ruger.com/corporate/BOD.html. Accessed November 30, 2017 Historically speaking, new product introductions do not tend to cannibalize demand for existing products Ruger is very strategic about its manufacturing in this industry. Often, with the launch of a new prod- facility locations. For a city to qualify as a potential uct, the demand for mature products tends to grow as location candidate, it must contain abundant electrical well. As a result, machines are not freed up and addi- supply, good transportation, a good workforce in the tional manufacturing space is ultimately required.15 community, numerous available engineers with strong Consequently, with the surge in sales from 2013 to 2016, manufacturing skills, and a building with space for several manufacturers, including Ruger, tried to increase future expansion. If these requirements are all fulfilled, their facilities and production capabilities to account for Ruger then evaluates the city's crime and drug-use rates the industry growth. Once President Trump took office, because all employees are required to pass a federal facility expansion efforts stopped." background check."Gun manufacture is similar to the manufacture of other metal products with moving parts that require precision machining and assembly."A typical gun con- tains between 50 and IUD parts The precision parts are made from raw steel shapes using expensive computer controlled machining stations.\" Third parties supply nger with various raw materials for its rearms and castings. These materials include things such as fabri cated steel components, walnut. birch. beech. maple. and laminated lumber for rie stocks. wax, ceramic mate rial, metal alloys, various synthetic products. and other component parts. Given the limited supply of these raw materials in the marketplace. the purchase prices tend to uctuate based on a ntu'nber of market factors.II Parts are assembled and nished by hand { sometimes with elaborate metal etching or other design work),and weapons are individually testfired.21 Research and Development innovation and new products drive demand for Roger rearms. Bill Ruger was a big proponent of innovation and made it a priority for his company. While he was CEO. he made guns that he wanted to shoot. oversee ing every design detail In 198], he stated, \"If I really personally like it, then I can be fairly sure and posi tive that there will be a lot of other people who ieel the same way.\"22 To this day. the company remains focused on RSED efforts, hiring the best engineers and ded icating 141 employees toward RarD efforts.\" In 2016. 2015, and 2014, the Company spent approximately $8.7 million, 53.5 million, and $10.0 million, respec tively. on research and development activities related to new products and to the improvement of existing products. About 30% of rearm sales are driven by new products. dened as those products having been in the market for less than two years." Marketing Ruger is known for providing high-quality products at low prices. In the early years of the company's history. Bill Roger recognized that the company did not have the kind of brand name that some of its competitors had, so Ruger was forced to gure out a way to produce highquality rearms at a lower cost. That is when he implemented the precision investment casting tech- nique. which allowed for the production of castings out of the highest strength alloys available at a reasonable cost. As a result of this technique, Ruger had the highest margins in the industry, which helped keep prices lent.25 The company still prices a number of its products mod' estly, such as its SR191I Lightweight Commander Style Pistol and its LCP II, which in turn offers consumers more value at a better price.:5 Ruger's products have excellent reputations. exem- plied by the fact that the company has been given the Firearms Manufacturer of the Year award by the National Association of Sporting Goods Wholesalers for eleven straight years.\" The company supports this reputation by advertising through a number of chan nels. including magazines. online advertising. and trade shows.\" Roger also uses promotional marketing tactics to create special relationships with its deal ers. One example of this is the \"Rapid Retail Rewards Program.\" also known as the \"4R Program.\" This pro gram awards points to dealers who sell Roger guns. Those points can then be redeemed for free Ruger rearms. Thus, the program helps keep dealers sat isfied while also increasing sales and gaining more exposure for Ruger products.\" Ruger rearms are primarily sold through a net work of federally Licensed, independent wholesale distributors who purchase the products directly from Roger and then resell them to federally licensed, inde pendent retail rearms dealers. Each distributor car ries the entire line of rearms manufactured by Roger for the commercial market. Currently, l8 distributors service the domestic commercial market, with an additional 23 distributors servicing the domestic law enforcement market, and 41 distributors servicing the export market. In 2016. Ruger's 4 largest distributors accounted for 65% of total sales: Davidson's (1996); Lipsey's {1796): Jerry'stEllett Brothers (15%}; and Sports South (14%).\" Civilians purchase rearms through gun stores, sporting goods stores, individual sellers, and some large retail stores. Roger's website is also an import ant avenue through which customers can familiarize themselves with guns. although regulations restrict how individuals can purchase firearms online. An indi vidual can buy a gun online from a federal rearms license ho Ider. The license holder then ships the gun to a licensed dealer, and the consumer has to go directly to the dealer for a background check before picking up the gun.'T Roger performs a semimonthly review of the estimated sell-through from the independent distrib- utors to retailers, as well as of the inventory levels in its warehouses and in the warehouses of its indepen dent distributors. These reviews allow the company to better plan production levels and appropriately man age inventory levels. Computer systems are used for the extensive documentation required to track each (-102 individual gun.n Ruger aims to turn its inventory six to eight times per year. Despite a tough second quarter in 201?, Roger was still able to turn inventory ve and a half times.'ll Human Resources Roger's training programs for employees vary depend ing on the type of employment. In 2011. the company implemented the Ruger Code of Ethics. which provides the Board, management, and employees with the neces sary tools needed to comply with industry standards.\" Additionaily. the Code helps create a workplace that pro motes accountability among its employees and ensures that Roger is holding itself accountable to its customers?\"5 The company's employees participate in a prot sharing plan and bonuses are awarded to employees based on the company's financial success.\" The company actively recruits individuals via the employment page on its Part-1:Care Swiss website and continuously posts new openings available in each of the company's facilities.\" Financial Condition Over the last five years, overall revenue for Roger has been choppy.\" For example, revenue decreased in 2015 to $551 million dollars, followed by a subsequent increase to $664 million dollars in 2.016.\" Total current assets have been steadily increasing over the past ve years, while total current liabilities haVe remained rel atively constant.\"I Roger's cash and short-term invest- ments have experienced a maior increase in the last three years, increasing from a little less than $9 million in 201% to $8? million in 20115.l Roger's: 03 201? nancial results indicate that the company is not meeting Wall Street expectations for its earnings per share and sales\" Ruger's operating prot margin in 2016 was 20.4%.\" Exhibits 2 and 3 contain detailed nancial infotrnation