Q1. What is the firm's competitive strategy? Does the strategy seem appropriate?
In the strictest sense, competitive strategy refers to how a company can gain a competitive advantage through a market while finding a distinctive way of competing. California-Illini Manufacturing Company is able to compete in the Global industry because they are handmade tillage and cultivating tools and they are American made; they use expensive metal pieces and are hand metal forged, along with using manual electric arc welders. There is in most every market the opportunity for handmade products, for example Lamborghini cars are hand made vehicles, which are more expensive, but because of the extensive labor they are considered to be better built. The industry however, is very competitive in American and the global market, and there are cheaper options available. With that said I think there is still a substantial market for the rugged, handmade, American tools and they should stick to their design strategy and use their family built, third- Generation Company known for the quality of tools as their trademark.
Q2. What motivated the cost reduction strategy? Did the cost reduction strategy work? Why?
The cost reduction strategy occurred because during the early to mid 1980’s during President Reagan’s first term an economic downturn struck companies, this depressed market caused many businesses like CI to struggle. Their inventory was down and the cash flow was poor, the company began to look into cutting cost, increasing prices, technology and productivity. In the short run (1989) the cost cutting strategy failed, operating expenses were up 20%, along with increased inventories by 24% and net profits continued to slip!
Q3. How did CI's standard cost system affect the cost reduction strategy? CI’s cost system was developed to measure performance and profit potential, each materials and labor input is given and production