Discuss about the Singleton’s Management Strategy.
Singleton is a company that manufactures standard and customized batteries for electric golf carts and wheelchairs respectively. It has been operating for the past 28 years, and its competitive advantage is its design, which allows it to use 20 percent less lead. Its first market is the wheelchair one where it has established a monopoly with its main client who requires customized batteries. In this market, 75 percent of the wheelchairs can use the standard batteries, and there are other small volume clients. Singleton’s advantage is its ability to provide these batteries under a short delivery time. The second market is the golf cart which consists of golf carts manufacturers. In this market, one of the clients in North America engages in seasonal buying. Presently, the golf cart market has new entrants from overseas that have affected the price sensitivity.
Singleton currently operates a plant that handles two shifts comprises of eight hours in a day and produces approximately 115,000 pumps annually. For excessive demand, the company can hire a third shift. However, the delivery time of the customized batteries is negatively affected when these resources are stretched. The annual expenses of the company include $4m salaries, $ 1.5m running costs and $ 2.8m plant depreciation. The approximate cost of the production materials obtained from suppliers is $80 for the standard batteries and $100 for the customized. The selling price is $140 for standard batteries and $ 600 for customized.
Evidently, the challenge that Singleton faces is the reduced sales in the golf cart market. The situation is worsened by the fact that production cannot be increased without interfering with the customized batteries. The company’s strategic plan is to adopt a new lithium technology that will increase capacity to 200,000 and reduce labor cost through automation. To acquire the technology, the company needs to purchase a license from the developer. This essay analyzes the options Singleton has with regards to product technology and process choice, focused manufacturing, experience curve, core competencies and process positioning and capacity strategies.
Singleton’s current process positioning is a result of its core competencies. The company retains its processes in-house because it can use a design, which allows it to use 80 percent of the lead required, that gives it a competitive advantage. The core competencies enable it to manufacture the batteries, which are the core products, used to produce end products such as electric golf carts and wheelchairs. Hamel and Prahalad (2003) state that the core competencies of a company are derived from the collaboration of technology and production capabilities. For Singleton, its core competency is the ability to use a design that guarantees a competitive advantage.
Additionally, when Singleton implements its new strategy, its core competency will be its expertise in Lithium Cell technology. The competency will be acquired from the purchase of a license from the organization that developed the technology. Additionally, it will be able to provide integration of the manufacturing process through the use of a new plant. According to Hamel and Prahalad (2003), in most cases, the core competencies are lost when strategies that reduce cost are implemented. For Singleton, the use of the new technology will reduce cost due to the reduction of labor. However, the core competencies will not be lost and the company will gain a competitive advantage instead.
Lastly, management and suppliers play a significant role in ensuring the core competencies are maintained. Hamel and Prahalad (2003) suggest that the management team is mainly focused on meeting the firm’s objectives and it may neglect core competencies in the process. For Singleton, the management team will have to acknowledge its core competencies and implement strategies that support them. Moreover, the company may have to change its management team to handle the new lithium technology due to the added complexity. Singleton would also need to develop a close relationship with the supplier of the technology to withstand competition from its competitors.
Process choice is vital in the operation of an organization. In most cases, the process choice is influenced by the objective of an organization (Mahadevan, 2015). For Singleton, the objective is to improve sales in the electric golf carts. In this case, processes that enhance batch production would be appropriate for customized and standard batteries. Additionally, mass production is also required to produce a large volume of the standard batteries. The process choice can be used to gain a competitive advantage when the method of production used saves on cost thus lowering prices (Mahadevan, 2015). Overall, the use of these choices in Singleton will achieve its objectives.
In addition, process choice influences how information flows within an organization. According to Jenkins (2018), the batch process previously selected is associated with a disconnected flow. For example, for Singletons, the activities involved in the manufacturing process are unique and not entirely connected to each other. Moreover, within the manufacturing process, some principal activities are established. One of the benefits of using this type of process is that it allows different products to be produced. In this case, the plant can produce both standard and customized batteries. The disadvantage of using this process is that it may take time to switch from the manufacture of one product to the other (Jenkins, 2018). Evidently, in this case, the merit outweighs the demerit.
Technology plays a significant role in the manufacturing process. Mahadevan (2015) suggests that the use of technology can benefit an organization if it gains a competitive advantage. Singleton has implemented the technological design to minimize the amount of lead required in production that has granted it the competitive advantage. Despite this, the company is threatened by the low sales witnessed in the electric golf cart sector. Therefore, its strategic plan is to use technology to gain a competitive advantage by increasing productivity while minimizing cost. However, the company will incur extra cost in implementation and improvement of health safety standards, but the reduction in labor costs will balance it.
Capacity strategies can also be used to solve the challenges facing Singleton. According to Pycraft (2000), capacity planning entails the determination of capacity required to meet fluctuating demand. Singleton requires an increase in capacity to withstand competition in the electric golf cart segment, and the use of new technology will achieve it. The company also has an existing long-term plan related to capacity. The plan entails meeting excess demand by adding a third shift, which stretches the available plant facilities and affects the delivery time of customized batteries. Since the company has a capacity strategy, it would also need one in its expansion strategies.
Additionally, Singleton needs to adopt a capacity lead demand strategy. Pycraft (2000) states that it requires the company always to have capacity to meet future demand. In this case, the policy would be effective because Singleton requires the excess capacity to meet the seasonal sales to the North American market. This policy also ensures the company meets the delivery time, which is essential to its loyal customers. Moreover, Singleton aims to invest in new a plant for the latest technology and the excess demand would assist in reducing demand shortages in case of initial challenges. However, the company will incur more cost due to the excess demand.
When increasing capacity, Singleton needs to consider overcapacity in the industry especially when its competitors increase capacity too. Being that Singleton is a leader in the industry based on its competitive advantage, it can avoid this challenge by announcing that it aims to increase its capacity. This action may discourage its competitors from imitating it since it already has a competitive advantage. Additionally, using this alternative, the company will benefit from short-term economies of scale attributed to the reduction in unit production cost due to increased output. It will also benefit from intermediate economies of scale if it practices focused manufacturing in the electric golf cart segment.
Singleton can adopt the experience curve strategies to solve its current problem regarding the reduced sales in the golf cart segment. The experience curve illustrates that the manufacturing cost reduces as the volume of output increases cumulatively (Hill, 2000). Consequently, the reduced costs reduce the price of the product, which increases the company’s share of the market. According to Ghemawat (1985), the experience curve works in industries that are price sensitive, which applies to the golf cart industry after the increase in the number of competitors. For this case, the company needs to use its manufacturing activities to reduce cost.
Singleton can use the new business technology under the experience curve strategy. According to Hill (2000), the use of new technology lowers the rate of the experience curve, which reduces the overall cost even when the output is similar, giving the company a competitive advantage. For this case, Singleton’s adoption of the new technology will increase output and lower costs due to reduced labor costs as mentioned earlier. This will be advantageous to the company since the reduced costs in the electric golf cart sector will allow it to acquire bigger market share hence defeating its competitors. Additionally, the increased output may be used to acquire markets in other sectors.
Despite these advantages of using the experience curve, Singleton may encounter some challenges. For example, reducing costs in manufacturing results from the company acquiring a market leader position in the industry. In most cases, such positions are difficult to acquire especially in Singleton’s case for the electric golf carts. Additionally, the process makes the company inflexible, which makes it vulnerable to threats from new entrants. Therefore, Singleton needs to implement an innovation plan in addition to the experience curve. Innovation aids the company in avoiding the disadvantages attributed to the experience curve through a continuous redesign that provides a competitive advantage.
The experience curve functions best when manufacturing is focused. This concept is used to depict the manufacturing processes that are focused on producing one product to solve a particular niche in a specific industry. Singleton has two production lines which are standard and customized batteries. The production of these two products occurs in the same facilities, which makes it difficult to increase the output volume of each because the delivery time for the customized batteries would be affected negatively. Therefore, the adoption of focused manufacturing is beneficial because it would allow an increased output of standard batteries.
Singleton can focus on the different types of batteries by dividing them in terms of volume. Hill (2000) states that a plant can be divided regarding the volume of output each product requires. In this case, the standard batteries need to be produced in a larger volume than the customized ones to withstand competition. Based on this option, the company would have two plants which are for the customized and standard batteries. This alternative may be very expensive especially when the new technology is incorporated. Despite this challenge, the company needs to be focused to achieve efficiency and implement the experience curve.
Therefore, the last option is to use the plant within a plant design to achieve the focus concept at a cheaper cost. In this case, a plant is divided into small independent sub-plants (Hill, 2000). For this case, the sub-plants would be two and produce customized and standard batteries respectively. This form of focus is advantageous because it is easier to reconfigure when demand changes unlike the previous model, which is rigid. Additionally, this model allows the centralization of activities that are common between the two sub-plants. The centralization enables Singleton to take advantage of the economies of scale and reduces cost.
Conclusion
Singleton needs to choose a solution that will guarantee increased production of standard batteries at a reduced cost. The new technology is a good option, but the production lines need to be separated based on focused manufacturing. The capacity lead demand strategy will also ensure the company meets the expected demand. Finally, new employees need to be hired or the existing ones trained to handle the new technology.
References
Ghemawat, P. (1985). Building strategy on the Experience Curve. Harvard Business Review [online]. Available from: https://hbr.org/1985/03/building-strategy-on-the-experience-curve [Accessed 4 May 2018].
Hamel, G. and Prahalad, C. (2003). The core competence of the corporation. Harvard Business Review [online]. Available from: https://pdfs.semanticscholar.org/8c8a/55409a0bfd9d25ff7a453cb75d5b29321009.pdf [Accessed 4 May 2018].
Hill, T. (2000). Manufacturing strategy: text and cases. Irwin McGraw Hill.
Jenkins, G. (2018). Process Choice. Mbatools [online]. Available from: https://www.mbatools.co.uk/Operations/processchoice.htm [Accessed 4 May 2018].
Mahadevan, B. (2015). Operations management: Theory and practice. Pearson Education India.
Pycraft, M. (2000). Operations management. Pearson South Africa.
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