Labor Cost Advanted

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-What strategic responses are potentially available to a firm facing competition from manufacturers enjoying a substantial labor cost advantage?

Changing a new cost system, focusing on customer needs.

What issues are relevant in considering moving a manufacturing plant to a low wage location?

Direct labor is an important factor, which is more relevant on manufacture of a product.

Was Schroeder’s differentiation strategy immune from imitation by its East European competitors?

They use different strategy to compete with East European countries.

What was the change in Schroeder’s strategy from 1995 to 1999?

New strategy. Focusing on customer needs. They decrease the support overhead cost, and then focus on Customer order processing costs and After-sales service costs The new strategy required efficient manufacture of many different types of motors to different customer specifications in small production runs to ensure quick turnaround on customer orders. By replacing almost every machine on the shop floor, a flexible automated manufacturing facility was created to support Schroeder’s new strategy

How did it affect the key success factors, pricing and production system at its Darmstadt plant?

Price does not change

Production increase

What were the average annual sales (units) per model?

330,841: 539 = 614 unit/ model

What was the average customer order size in 1999?

From 10 to 200 unit per order

What was the average number of after-sales service hours per customer order?

162,354: 3263 = 49.75 (50)

What do these averages tell you about the production environment at the Darmstadt plant in 1999?

The increase in the number of orders for custom motors similarly resulted in an increase in activities related to after-sales service. An analysis indicated...
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