Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Contrast MPC's previous manufacturing strategy with its new manufacturing strategy. Generally speaking, why would a company that changes its strategic goals need to change its

  1. Contrast MPC's previous manufacturing strategy with its new manufacturing strategy.
  2. Generally speaking, why would a company that changes its strategic goals need to change its performance measurement system as well? What are some examples of measures that would have been appropriate for MPC prior to its change in strategy? Why would those measures fail to support MPC's new strategy?

Thank you

image text in transcribedimage text in transcribed
Clipboard Font paragraph is Styles Mason Paper Company (MPC) manufactures commodity-grade papers for use in computer printers and photocopiers. MPC has reported operating losses for the last two years due to intense price pressure from much larger competitors. The MPC management teamiincluding Kristen Townsend (CEO), Mike Martinez (vice-president of Manufacturing), Tom Andrews (vice-president of Marketing), and Wendy Chen (CFO)is contemplating a change in strategy to save the company from impending bankruptcy. Excerpts from a recent management team meeting are shown below: Townsend: As we all know, the commodity paper manufacturing business is all about economies of scale. The largest competitors with the lowest cost per unit win. The limited capacity of our older machines prohibits us from competing in the high-volume commodity paper grades. Furthermore, expanding our capacity by acquiring a new paper-making machine is out of the question given the extraordinarily high price tag. Therefore, I propose that we abandon cost reduction as a strategic goal and instead pursue manufacturing exibility as the key to our future success. Chen: Manufacturing exibility? What does that mean? Martinez: It means we have to abandon our \"crank out as many tonnes of paper as possible\" mentality. Instead, we need to pursue the lowvolume business opportunities that exist in the non-standard, specialized paper grades. To succeed in this regard, we'll need to improve our exibility in three ways. First, we must improve our ability to switch between paper grades. Right now, we require an average of four hours to change over to another paper grade. Timely customer deliveries are a lnction of changeover performance. Second, we need to expand the range of paper grades that we can manufacture. Currently, we can manufacture only three paper grades. Our customers must perceive that we are a \"one-stop shop\" that can meet all of their papergrade needs. Third, we will need to improve our yields (e.g., tonnes of acceptable output relative to total tonnes processed) in the non-standard paper grades. Our percentage of waste within these grades will be unacceptably high unless we do something to improve our processes. Our variable costs will go through the roof if we cannot increase our yields! Chen: Wait just a minute! These changes are going to destroy our equipment utilization numbers! Andrews: You're right, Wendy; however, equipment utilization is not the name of the game when it comes to competing in terms of exibility. Our customers don't care about our equipment utilization. Instead, as Mike just indicated, they want justintime delivery of smaller quantities of a full range of paper grades. If we can shrink the elapsed time from order placement to order delivery and expand our product offerings, it will increase sales from current customers and bring in new customers. Furthermore, we will be able to charge BY ALIL LISS A ELILILLY , I USE CHANGED all Silly w Holly will suply filled numbers ! Andrews : You're right , Wendy ; however , equipment utilization is not the name of the game when it comes to competing in terms of flexibility . Our customers don't care about our equipment utilization . Instead , as Mike just indicated they want just - in ant just - in - time delivery of smaller quantities of a full range of paper grades . If we can shrink the elapsed time from order placement to order delivery and expand our product offerings , it will increase sales from current customers and bring in new customers Furthermore we will be able to charge a premium price because of the limited competition wi thin this niche from our cost - focused larger competitors fors . Our contribution margin per tonne should drastically improve Martinez : Of course , executing the change in strategy will not be easy . We'll need to make a substantial investment in training because ultimately it is our people who create our flexibl manufacturing capabilities . Chen : If we adopt this new strategy , it is definitely going to impact how we measure performance . We'll need to create measures that motivate our employees to make decisions that support our flexibility goals Townsend : Wendy , you hit the nail right on the head For our next meeting , could you pull together some potential measures that support our new strategy ? Required 1 . Contrast MPC's previous manufacturing strategy with its new manufacturing strategy 2 . Generally speaking , why would a company tha any that changes its strategic goals need to change its performance measurement system as well ? Wha tare some examples of measures that would have been appropriate for MPC prior to its change in strategy ? Why would those measures fail to support MPC's new strategy

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Financial Accounting Concepts

Authors: Thomas Edmonds

7th Edition

73527122, 978-0073527123

More Books

Students also viewed these Accounting questions

Question

6-2. What is the trade feedback effect?

Answered: 1 week ago