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Competitive Strategy – Husky Case

21/12/2009

Question #1:

What is Husky’s strategy? Why has the company been so successful prior to the recent problems?

Answer #1:

The primary reason for Husky’s success, since the end of the 1970s until 1995, is the polyethylene terephthalate (PET) industry

niche to which the company focused itself at that time. The focus on the PET technology was accompanied with a shift of the soft

drink makers to the plastic bottles usage.

Husky positions itself as a company providing its plastic industry customers with the complete and comprehensive manufacturing

solutions. This strategy is implemented by producing machines based upon technological innovation, durability, reliability and

efficiency on one hand and by providing its customers with a professional, reliable and quick service, based on highly trained

technician on the other hand.

The delivery of high technologic machines with both characters of speed and efficiency positioned Husky as the leader of this

niche. This was actually achieved by placing high obstacle for competitors to get into this niche with compatible products and by

eliminating the bargaining ability of the customers, due to the top performance of its products relatively to the competitive ones

and the worldwide professional service.

Question #2:

Are Husky injection molding systems worth the premium price the company charges?

Answer #2:

According to the information in this case (exhibit  #6), Husky charges for its product 200,000$ higher relatively to competitor’s

product. For answering this question, whether the premium above is justified from the customer’s point of view, the following

calculation will be made:

Part 1:

Calculating the amount of days it will take to product the same amount of products with the competitor’s machine:

 

  Husky’s Machine
Competitor’s Machine
Cycle-Time [sec] 10.4 11.8
Work per day [hours] 22.3 18.9
Products per day    
Products per year   (Irrelevant)

Part 2:

Calculating the amount of days for producing the same amount of products that produced by Husky’s machine in a year:

Part 3:

Calculating the cost for producing the same amount of products that is produced in a year – 365 days – by Husky’s machine and

within 488 days in the competitor’s machine, for producing the same amount of products.

The information in the case provides very limited data regarding both the constant and the variable expenses of the production

process. As a result, the next calculation assumes the constant expenses are low relatively to the variable expenses.

Thus, the saves costs can be done while using the two values above (365 and 488), namely the usage of Husky’s machine saves

relatively to the usage of the competitor’s machine.

Husky’s machine costs,  less then the competitor’s machine.

Thus, Husky injection molding systems do worth the premium price the company charges.

Question #3:

What has caused Husky’s difficulties?

Answer #3:

There are two main reasons for the difficulties Husky were facing:

The first one might be related to the failure of Husky to regard the economic of scope, namely to adopt a wide view of the plastic

industry. The shortage of resin needed for the PET resin makers, caught Husky by a surprise. This shortage severely damaged the

processor sector of the industry and thus, it heavily effected the equipment manufacturing companies. The implication of the

crisis above was highly severe for Husky, since the PET production accounts for the highest contribution for Husky’s profitability.

Adopting a wider scope of the industry might lead Husky to take actions for preventing this shortage by warning the industry in

advance.

The second reason for the difficulties Husky was facing was the entry of competitors to the PET business that launched substitute

products with significant lower cost. Those new products increased the bargaining abilities of the customers or, in other words,

decreased the willingness of the customers to pay for the more expensive Husky’s product.

Question #4:

How should Schad and the company respond?

Answer #4:

The short-term actions Husky should take for improving her business status are as follows:

Offering the products for lower cost: This action will improve the status of Husky’s products relatively to the substitute products.

In addition, this action might pose greater obstacle for other competitors to enter the PET business. The financial compensation for

this action might be achieved by limiting the extensive worldwide support for the lower-priced product that might still be better

relatively to the substitute products.

Moreover, this action might be time limited until Husky will assure the its market dominance and thus the financial damage of

such an action might be limited.

Performing extensive ROI process of potential and current customers: This action might prove official proof the profitability of

purchasing the higher technical machines of Husky, despite its higher cost, while providing the extensive scope of the product’s

efficiency, performance and reliability. This action may be also directed to the potential customers of the substitute products for

directly damaging the entry extend of the substitute products into the PET business.

Tougher attitude of Husky’s sales people: The text refers the actual Husky marketing stuff as totally unprepared for this defensive

status the company is facing. Thus, entering a fresh blood into this highly important company group seems to be needed. This can

be easily achieved by recruiting professional marketing people.

In addition, Husky might consider the following long-term actions that will improve its position in the long run:

Extending its grip in other businesses of the plastic injection molding system: The technology the company possesses might be

useful in producing machines for similar businesses, like the Yogurt cups and the bottle caps.

Producing lower cost machines: Successfully confronting the substitute products might be the production of similar products with

lower technology, but the same highly professional service that played a key factor on Husky’s success so far.

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