case
Morrissey Forgings, Inc.
This heavily disguised case is set in the "mature" woodstoves business in 1986. It is not based on The Vermont Castings Company. The issue is product line strategy based on product line profitability.
In early 1986, Tim Morrissey was reviewing the disappointing 1985 results of operations for his company (see Exhibit 1). The business had been founded in 1938 by Tim's grandfather as a modernization of an older iron forge company which Tim's great-great-grandfather had built up over the years since 1902. The company entered the cast iron wood stove business when that market boomed in the early-1970s. By 1977 wood heating stoves was its only product line. The business operated out of leased factory and office space in Bridgewater, Vermont which was owned by a family trust. Business had been very good through 1980, with a strong market for "environmentally sensitive" heat sources in the New England region which the Company served. Stove sales in 1983 were $9 million for 30,000 units. By 1985, however, the wood stove was a "declining" product with more than thirty competitors, a well known manufacturing technology, a shrinking market, heavy price pressure, and intense rivalry. By the mid-1980s, there was a growing sense that wood stoves were an environmental problem (air pollution), more than an environmental solution. Possible EPA legislation was a concern for the industry.
Faced with declining profitability, declining unit sales and substantial excess manufacturing capacity, MFI had introduced a new product line in 1984--a combination wood stove and baking oven.
This product required a minor modification of a wood stove, adding a brick-lined baking compartment with a hinged door and a heat gauge. It was targeted at persons who might consider brick oven baking with wood to be an attractive extension of heating with wood. The idea was not original with
Bridgewater, but there were no major competitors at the time. The oven
This heavily disguised case is set in the "mature" woodstoves business in 1986. It is not based on The Vermont Castings Company. The issue is product line strategy based on product line profitability.
In early 1986, Tim Morrissey was reviewing the disappointing 1985 results of operations for his company (see Exhibit 1). The business had been founded in 1938 by Tim's grandfather as a modernization of an older iron forge company which Tim's great-great-grandfather had built up over the years since 1902. The company entered the cast iron wood stove business when that market boomed in the early-1970s. By 1977 wood heating stoves was its only product line. The business operated out of leased factory and office space in Bridgewater, Vermont which was owned by a family trust. Business had been very good through 1980, with a strong market for "environmentally sensitive" heat sources in the New England region which the Company served. Stove sales in 1983 were $9 million for 30,000 units. By 1985, however, the wood stove was a "declining" product with more than thirty competitors, a well known manufacturing technology, a shrinking market, heavy price pressure, and intense rivalry. By the mid-1980s, there was a growing sense that wood stoves were an environmental problem (air pollution), more than an environmental solution. Possible EPA legislation was a concern for the industry.
Faced with declining profitability, declining unit sales and substantial excess manufacturing capacity, MFI had introduced a new product line in 1984--a combination wood stove and baking oven.
This product required a minor modification of a wood stove, adding a brick-lined baking compartment with a hinged door and a heat gauge. It was targeted at persons who might consider brick oven baking with wood to be an attractive extension of heating with wood. The idea was not original with
Bridgewater, but there were no major competitors at the time. The oven