The Company / Management / Competition / Strategy / Cost System
►The Superior Company has manufactured three industrial products: 101, 102 and 103. These have been supplied to other manufacturers in different proportions. Their share on the market in 2004 has been respectively 12% for 101 with a price of $24.5 per 100 pounds of product, 8% for 102 with a price of $25.8 per 100 pound of product and 10% for 103 with a price of $27.5 per 100 pounds of product.
►The Company has been founded and controlled by Richard Harvey until 2004, and after his death his son Paul Harvey took over the control of the Company. After few poor decisions during the 2004 which resulted in a net loss of $688,000 and morale suffer in the company, he made a decision to attract a new Gen. Manager (Herbert Waters) from the competition by offering him a stock option incentive in addition to his salary and entitling him with a full authority for execution of desired changes.
First steps of the new manager had been to conduct a brief evaluation of 2004 performances and to wait for the 2005 results for which he ordered statement with detailed expenses and earning by product and department for 2004 and further explanation of the nature of the company’s costs.
►There had been 8 companies on the market.
The dominant competitor has been the Samra Company which was the leader in setting up the prices on the market, which other followed. It acted as sole regulator of the prices on the market.
►Manufacturing process was divided in 3 separate factories for each product: 101 Factory, 102 Factory and 103 Factory each with its own storage and production line, finished product inventory, shipping, separate hourly workers, shift managers and related personnel.
Manufacturing facilities operated below capacity.
►The Company maintained simple cost system assigning all of the company’s costs to each of the three products in a way that...