Assignment OM/MBA/TRIM-II

Case1: Motorola’s Global Strategy

For years Motorola and other U.S. firms such as RCA, Magnavox, Philco, and Zenith were
among the world’s most successful consumer electronics firms. In the face of withering
competition from the Japanese, however, these firms began to fall by the wayside.
Motorola has remained the exception: Today it is one of the world leaders in mobile
communication technology, including the manufacture of cellular telephones, paging
devices, automotive semiconductors, and microchips used to operate devices other than
computers. Motorola has taken on the Japanese head-to-head. Although it may have lost
a few battles here and there, the firm has won many more.

Motorola heard the call to battle in the early 1980s. The firm then controlled the emerging
U.S. market for cellular telephones and pagers but, like many other firms at the time, was
a bit complacent and not aggressively focused on competing with the Japanese.
Meanwhile, Japanese firms began to flood the U.S. market with low-priced, high-quality
telephones and pagers. Motorola was shoved into the background.

At first, managers at Motorola were unsure how they should respond. They abandoned
some business areas and even considered merging the firm’s semiconductor operations
with those of Toshiba. Finally, however, after considerable soul searching, they decided
to fight back and regain the firm’s lost market position. This fight involved a two-part
strategy: First learn from the Japanese and then compete with them.

To carry out these strategies, executives set a number of broad-based goals that
essentially committed the firm to lowering costs, improving quality, and regaining lost
market share. Managers were sent on missions worldwide, but especially to Japan, to
learn how to compete better. Some managers studied Motorola’s own Japanese
operation to learn more fully how it functioned; others focused on learning about other
successful Japanese firms. At the same time, the firm dramatically boosted its budgets
for R&D and employee training worldwide.

One manager who visited Japan learned an especially important lesson. While touring a
Hitachi plant north of Tokyo, he noticed a flag flying in front of the factory emblazoned
with the characters P200. When he asked what it meant, he was told by the plant
manager that the factory had hoped to increase its productivity by 200% that year. The
manager went on to note somewhat dejectedly that it looked as if only a 160% increase
would be achieved. Because Motorola had just adopted a goal of increasing its own
productivity by 20%, the firm’s managers soberly realized that they had to forget
altogether their old ways of doing business and reinvent the firm from top to bottom.
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Old plants were shuttered as new ones were built. Workers received new training in a
wide range of quality-enhancement techniques. The firm placed its new commitment to
quality at the forefront of everything it did. It even went so far as to announce publicly
what seemed at the time to be an impossible goal: to achieve Six Sigma quality, a
perfection rate of 99.9997%. When Motorola actually achieved this level of quality, it
received the prestigious Malcolm Baldrige National Quality Award.

Even more amazing have been Motorola’s successes abroad, especially in Japan. The
firm has 20 offices and more than 3,000 employees there. It is currently number three in
market share there in both pagers and cellular telephones. Worldwide, Motorola controls
much of the total market for these products, has regained its number-two position in
semiconductor sales, and is furiously launching so many new products that its rivals seem
baffled.

Today, Motorola generates over 56% of its revenues abroad. Major new initiatives are
underway in Asia, Latin America, and Eastern Europe. The firm has also made headway
in Western Europe against entrenched rivals Philips and Thomson. But not content to rest
on its laurels, Motorola has set new–and staggering–goals for itself. It wants to take
quality to the point where defects will be counted in relation to billions rather than millions.
It wants to cut its cycle times (the time required to produce a new product, the time to fill
an order, and/or the time necessary to change a production system from one product to
another) tenfold every five years. It also wants over 75% of its revenues to come from
foreign markets by 2002.

DISCUSSION QUESTIONS

1. What are the components of Motorola’s international strategy?

2. Describe how Motorola might have arrived at its current strategy as a result of a
SWOT analysis.
3. Discuss Motorola’s primary business strategy.

Case2: The North-South Airline

In 2008, Northern Airlines* merged with Southeast Airlines to create the fourth largest
U.S. carrier. The new North-South Airline inherited both an aging fleet of Boeing 737—
200 aircraft and Stephen Ruth. Ruth was a tough former secretary of the navy who
stepped in as new president and chairman of the board.

Ruth’s first concern in creating a financially solid company was maintenance costs. It was
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commonly believed in the airline industry that maintenance costs rose with the age of the
aircraft. Ruth quickly noticed that, historically, there has been a significant difference in
reported B737—200 maintenance costs (from ATA Form 41s) both in the airframe and
engine areas between Northern Airlines and
On November 12, 2008, Ruth assigned Peg Young, vice president for operations and
maintenance, to study the issue. Specifically, Ruth wanted to know (1) whether the
average fleet age was correlated to direct airframe maintenance costs and (2) whether
there was a relationship between average fleet age and direct engine maintenance costs.
Young was to report back with the answer, along with quantitative and graphical
descriptions of the relationship, by November 26.

First, Young had her staff construct the average age of Northern and Southeast B737-
200 fleets, by quarter, since the introduction of the aircraft to service by each airline in
late 1999 and early 2000. The average age of each fleet was calculated by first multiplying
the total number of calendar days that each aircraft had been in service at the pertinent
point in time by the average daily utilization of the respective fleet to total fleet-hours
flown. The total fleet-hours flown was then divided by the number of aircraft in service at
that time, giving the age of the "average" aircraft in the fleet.

The average utilization was found by taking the actual total fleet-hours flown at September
30, 2008, from Northern and Southeast data, and dividing by total days in service for all
aircraft at that time. The average utilization for Southeast was 8.3 hours per day, and the
average utilization for Northern was 8.7 hours per day. Because the available cost data
were calculated for each yearly period ending at the end of the first quarter, average fleet
age was calculated at the same points in time.

The fleet data are shown in the following table. Airframe cost data and engine cost data
are both shown paired with fleet average age.

North-South Airline Data for Boeing 737-200 Jets

Northern Airlines Data Southeast Airlines Data
Engine Engine
Airframe Cost Average Airframe Cost Average
Cost per per Age Cost per per Age
Year Aircraft Aircraft (hours) Aircraft Aircraft (hours)
2001 $51.80 $43.49 6,512 $13.29 $18.86 5,107
2002 54.92 38.58 8,404 25.15 31.55 8,145
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2003 69.70 51.48 11,077 32.18 40.43 7,360

2004 68.90 58.72 11,717 31.78 22.10 5,773
2005 63.72 45.47 13,275 25.34 19.69 7,150
2006 84.73 50.26 15,215 32.78 32.58 9,364
2007 78.74 79.60 18,390 35.56 38.07 8,259

*Dates and names of airlines and individuals have been changed in this case to maintain
confidentiality. The data and issues described here are actual.

DISCUSSION QUESTION

Prepare Peg Young’s response to Stephen Ruth.

Case3: Southwestern University’s Location Decision

With the steady growth in attendance at Saturday home football games, Southwestern
University’s president, Dr. Joel Wisner, had reached a decision. The existing stadium,
with seating capacity of 54,000, simply would not suffice. Forecasts showed increasing
interest in the program [see Southwestern University: (B) in Chapter 4], and complaints
by loyal fans and big-money athletic club boosters revealed the need for premium-class
seating and luxury amenities not found in a 1950s-era stadium [see Southwestern
University: (C) in Chapter 6].

But the choice of what to do was anything but clear to President Wisner. His vice president
of development, Leslie Gardner, had presented three options: (1) expand the existing
stadium to 75,000 seats, adding numerous luxury skyboxes and upgrading most of the
yardline seats to include comfortable backings; (2) build a brand-new stadium three miles
from campus on land, worth about $3 million, donated by a team booster; and (3) signing
a 10-year contract with the Dallas Cowboys football team to rent their stadium, 28 miles
away, for a fee of $200,000 per game.

Each of these options had clear benefits–yet each had at least one very strong negative
as well. Expanding the current facility carried a $12 million price tag, with an annual fixed
cost of about $1 million and with a variable cost of about $1 per attendee. If the job were
not completed in the nine-month off-period between seasons, the team would be left
without a home field on which to play in 2004. This meant reneging on contract dates with
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powerhouse teams that were signed some 3 to 4 years earlier. Contract violations are not
a matter taken lightly in the NCAA or the Big Eleven Football Conference.

Building a brand-new stadium off-campus would yield a plush, state-of-the-art facility, but
it had to be named after the donor of the land. It also meant a huge fundraising drive on
the order of $40 million by President Wisner, plus likely bond insurance placing a 20-year
debt burden on the college’s balance sheet. He tentatively concluded that fixed cost would
be in the neighborhood of $5 million per year and variable cost about $2 per attendee.

The third option had definite advantages from the perspective of many, if not most, of the
fans who attended the games. A large number already lived in the Dallas—Fort Worth
area and would be spared the long commute and horrible traffic jams that always seemed
to occur in Stephenville on game days. Clearly, however, students would be unhappy and
buses would have to be provided by SWU, for free, to bring students from Stephenville to
Dallas. While the actual noted price of $200,000 per game seemed high on the surface,
the $1 million per season (there are five home games a year) was a drop in the bucket
compared to the other options. However, the Dean of Students said the school should
expect the bus transportation to be about $10 for each of the 15,000 student tickets sold
for each game.

Prior to asking the VP of finance to do the detailed analysis, President Wisner asked
Gardner to survey three groups that held personal stakes in the project: students, booster
club members, and college faculty/staff. Selecting 50 people at random in each of these
groups, Gardner asked them to "grade" each possible location on five factors. Using letter
grades, the results are shown in the table below.

New Site 3 Dallas

Miles from Cowboys
Factors Existing Sites Campus Facility

Students’ Ratings of Locations

Convenience A B F
Guaranteed C D A
Availability for
Next Season
Comfort B A A
Cost A D B
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National D B B
Image

Boosters’ Ratings of Locations

Convenience D D A
Guaranteed B C A
Availability for
Next Season
Comfort C B A
Cost A C A
National C C B
Image

College Faculty/Staff Ratings of Locations

Convenience B C D
Guaranteed A C A
Availability for
Next Season
Comfort C A B
Cost A D B
National B B C
Image

Gardner decided to give equal weight to the grading of each of these groups. But the
administration did not equally weigh the five factors. "Cost" and "guaranteed availability"
were rated twice as important as "convenience," which in turn was ranked twice as
important as "comfort" and "national image."

DISCUSSION QUESTIONS

1. Are the factors Gardner selected for evaluation reasonable and complete? What
others might be included?
2. Prepare a crossover chart based on the information provided.
3. Based first on your analysis of the survey data, and then on your analysis of the
crossover charts, provide a justification for each location. Provide a complete list
of reasons for not selecting each of the three sites.
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4. Which location do you recommend, and why?

5. Discuss the process followed by Gardner.

Case4: Microfix Inc.

Microfix Inc. has been manufacturing peripherals for microcomputers for the past decade.
Over the years, Microfix's mainstay has been hard disk drives.

Because of a recent slump in sales, Microfix has decided to expand its product line. After
much deliberation among executives, engineers, production personnel, and marketing
personnel, a decision was made to produce plug-in 256 MB backup systems for Dell
laptop computers. Microfix intends to convert its hard disk expertise to plug-in expertise
and to become the cost leader for this one type of product for this one series of machines.

The marketing department has performed a major analysis of machines and backup
systems and feels that after one year 60,000 units per year is a reasonable sales goal.
The feeling among upper management, however, is that this might be overly optimistic.
The number management prefers is 1,000 units per week. Current operations use a
standard forty-hour week, and the operations vice-president insists that this be
maintained for the new product.

Developing the steps in producing the plug-in system has been a project in itself.
Engineers, production managers, and assembly line workers collaborated to create a
precedence graph and table. First, some twenty-five different steps in production were
identified. Then, the group set precedences for each task. At this point, the line workers
developed the task times, using known task times for tasks identical to current tasks,
estimates for tasks similar to current tasks, and, for some tasks, conjecture. After all of
this effort, the following assembly line table was developed.

Time (in minutes) Predecessors

Task
A 1.00 None
B .40 A
C .45 A
D 1.10 A
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E .36 A
F .05 None
G 1.32 B, C
H .49 C, D
I .54 E
J 1.54 E
K .35 F
L 2.10 G
M .30 H, I
N 1.82 I
O .89 J
P 1.20 L, M, N
Q 1.30 N, O
R .62 O
S 1.30 K
T 1.20 P, Q, R, S,
U 1.80 S
V .30 T
W .87 U
X 1.20 U
Y 1.90 V, W, X

DISCUSSION QUESTION

1. The managers still have much work to do. They must begin by determining the
appropriate balance that operations should strive for. They must consider that
some of the time estimates may be off by as much as 10 percent, and they must
consider that the demand will change over time. Find their initial balance, and
determine how sensitive this balance is to all of these factors.
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Case5: LaPlace Power and Light Co.

The southeastern Division of LaPlace Power and Light Company is responsible for
providing dependable electric service to customers in and around the area of Metairie,
Kenner, Destrehan, LaPlace, Lutcher, Hammond, Pontchatoula, Amite, and Bogalusa,
Louisiana. One material used extensively to provide this service is the 1/0 AWG aluminum
triplex cable, which delivers the electricity from the distribution pole to the meter loop on
the house.

The Southeastern Division Storeroom purchases the cable that this division will use. For
the coming year, this division will need 499,500 feet of this service cable. Because this
cable is used only on routine service work, practically all of it is installed during the 5
normal workdays. The current cost of this cable is 41.4 cents per foot. Under the present
arrangement with the supplier, the Southeastern Storeroom must take one twelfth of its
annual need every month. This agreement was reached in order to reduce lead time by
assuring LaPlace a regular spot on the supplier’s production schedule. Without this
agreement, the lead time would be about 12 weeks. No quantity discounts are offered on
this cable; however, the supplier requires that a minimum of 15,000 feet be on an order.
The Southeastern Storeroom has the space to store a maximum of 300,000 feet of 1/0
AWG aluminum service cable.

Associated with each shipment are ordering costs of $50, which include all the costs from
making the purchase requisitions to issuing a check for payment. In addition, inventory
carrying costs (including taxes) on all items are considered to be 10% of the purchase
price per unit per year.

Because the company is a government-regulated, investor-owned utility, both the

Louisiana Public Service Commission and its stockholders watch closely how effectively
the company, including inventory management, is managed.

DISCUSSION QUESTIONS

1. Evaluate the effectiveness of the current ordering system.

2. Can the current system be improved?