1 Evaluate the changes that took place in the segmentation of Powerdrive’s market.

Tom Cross took over as Managing Director at Powerdrive Motors in South Africa three years ago. At the time, the company was an established manufacturer of small electric motors with a strong reputation for product reliability and technical leadership. On the downside, it was also regarded in the trade as having high prices and variable delivery.
Tom’s first task was to tackle the huge product variety on offer. He saw this as the major problem in addressing the negative views in the marketplace, and also saw opportunities in streamlining design and production. The product range was replaced with a new generation of designs based on a few hundred ‘modules’, which could be assembled in many different combinations to give variety at low cost. This meant the loss of some customers who had gone to Powerdrive because they could rely on the company’s technical leadership to produce designs that suited their particular needs.
This was not considered important because the combined sales volume of such customers was under 5 per cent.
Using the new designs, Tom was now able to reorganise the factory into cells that produced major subassemblies such as rotors and stators. The work flow was transformed, and manufacturing throughput time was reduced from six weeks to just four days. Cost improvements meant that average price reductions of between 10 and 15 per cent could be offered.