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LE PETIT CHEF

Microwave Ovens
Arun Shan S Pankaj Kesarwani Paul joseph Priyank Srivastava Sowmiya V Sowmya Borra

AGENDA

Case Facts Core Issues Factors for Poor Performance Stage Gate Model Product Selection & Development Plan of Action

CASE FACTS
Microwave oven History

1940 - RADAR(Radio Detecting and Ranging) 1946 - Magnetron and Chocolate Bar 1947 - The first commercial product hit the market 1952 - First home microwave model at $1295

COST STRUCTURE OF A MICROWAVE OVEN AS A %


OF TOTAL COST Microwave Cost Structure
Raw Materials Direct Labor Indirect Labor General Overhead & Depreciation 65% 10% 6% 11%

Module & Assembly Costs


Cavity Power Supply Microwave system (magnetron, wave-guide) 15% 25% 15%

Door
Controls

10%
10% 10% 15% 100% 40%

Logistics & Stock holding


Development Total

5%
3% 100%

Final Assembly Other Total Cost of Grill, crisp& control

RECENT DEVELOPMENTS
Advances in wave-guide and cavity design. Combi-ovens - A combination of microwave and other cooking modes (steaming, browning and grilling) Accessories - Allows users to cook specific types of food with greater consistency Intelligence - Fuzzy logic (new control technique)

WORLDWIDE SHIPMENT OF MICROWAVE APPLIANCES


35 30 25 20 15 10 5 0 25.3 23.1 20.5 19.5 22.5 25.1 31.7 28.2 27.3

27.7

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

LE PETIT CHEF
Founded in 1989 by Laurent Laferriere Product line includes Mixers, coffee machines, griller/toasters and microwave ovens Egalite & LiberteHigh end segment micro ovens Combi-ovens Microwave ovens 85% revenues Largest Markets France & Rest of Western Europe Appliances sold in 12 European countries

EXISTING
Back Ground

PIC

o The European Microwave oven has an average household penetration of 58% by 1999. o The buyers also prefer higher end products.
Focus

o Microwave oven with convection and grilling elements.

o Need to focus on higher end market with good R&D support


GOALS/OBJECTIVES:

o To dominate in the area of French Microwave cooking

o Build a recognisable brand Identity.


o To diversify in to manufacturing other high counter top appliances.

PRODUCT MIX

TURNOVER

BY

GEOGRAPHIC REGION

7% 15%
Microwave ovens Breakfast appliances Mini ovens

8% 8% 8% 41%
Western Europe France

17%

61%

35%

Eastern Europe N&S America

Food preparation

Rest of the World

STRATEGY
Encouraged strong inter-functional coordination and cooperation Operating structure High conformance quality, reliable order deliveries and low costs Differentiated through (High investment in R&D) - Technological Innovation - Performance features

Direct relationship with the retailers


Launching new products Extensive Advertising

PROJECT SELECTION
Opportunity Development
Series of R&D led meetings with Marketing & sales to sense customer needs Lead Technical developers to identify new technical directions Manufacturing to scrutinize promising process enhancements

Opportunity Refinement

R&D screens ideas into a no of viable projects and documents as formal development proposals Gathering inputs from Marketing, Sales and Manufacturing as needed Prepares pro-forma NPV worksheet

Opportunity Selection

Director of R&D selects the projects to be funded Taking into consideration the projected returns from the available resources

PROJECT EVALUATION
A cross-functional working group was set up to project execution process

Individual projects were organized with clear leadership from the R&D unit
and included members of other units Project plan include the NPV analysis, a project charter and the detailed sequence of project activities for review by head of the departments

1990S MARKET DEVELOPMENT


Increased competition Asian manufacturers Decline in prices

CRISIS
Trade off b/w cost & quality Lack unit volumes for each product offering Manufact Increased manufacturing complexity uring

Delay in launch of new model Lack of visible product differentiation Marketing Increased expense impacting budget

Limited resources & Large no. of projects R&D

GAGNES DILEMMA
New intelligent line of oven featuring Fuzzy logic 306 people; 18 months; 7,000,000; extensive R&D

Cost reduction of Egalite to introduce a low cost, low end Fraternite line

72 people; 12 months; 20,000,000; marketing

New original design of low cost, low end Fraternite line

180 people; 18 months; 10,000,000; counter proposal from R&D

Develop Liberte express quick heating model by upgrading to powerful magnetron Add larger cavity model to Liberte line

24 people; 6 months; 15,500,000

30 people; 6 months; 14,400,000

CORE ISSUES
Steady decline in performance for past 5yrs despite high investments and increased product lines Drop in margins due declining prices of Microwave oven in the market

Missing revenue targets and cost control targets


Issues of allocating resources to R&D & financial constraints in moving ahead with projects

The number of complaints regarding R&D mainly on Delays


Internal complaints in R&D about Overwork Asian & European manufacturers are matching up with quality and that

too at very low cost

Profit %
16

14

12

10

Profit %

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(e)

FACTORS FOR POOR PERFORMANCE


Increased competition leading to decline of price in turn affecting companys revenues Annually 10% decline in prices from 1996-2000 Low end market dominated by Japanese players European players( Electrolux, Bosch-Siemens moved up-market) Lack of resources for full fledged competition Higher operating costs, high investment in R&D that cannot be fed by current profits Inefficient utilization of resources
o 7 to 30 products from 95-99 o 5 proposed projects & 7 in pipeline o Churning out 5 model upgrades every year

Stage Gate Product Management Tool

Stage Gate

Initial Screen

Preliminary Assessment

Second Screen

Definition

Decision on Business

Developme nt

Post Devlpmt Review

Precommerciali zation Decision Commercial ization

Validation

SCREEN 1 - INITIAL SCREEN


Firms core business resources are aligning with concepts

Market Attractiveness is based on pricing Reducing the price can help


sustain the market Carrying forward all the projects is not feasible due to financial and human resource constraints The strategically aligned ideas are those
o increasing the quality

o
o

reducing the cost and


those proposed by marketing team

STAGE 1 - PRELIMINARY ASSESSMENT


Key Users and Focus Groups
o Voice of the Customer (VOC)
o Survey from actual work environment o Quick concept test with potential users

Cost and Time to execute All ongoing projects which are taking more than 6 months are kept in pool for later analysis, based on companys growth/ shrinkage

PROPOSED PROJECTS

ONGOING PROJECTS

To meet improved cooking performance of the competitors Larger cavity design in stack

Larger Cavity

Function keys from top to side More space per footprint

Latest(From 2006) Functions set in door and hence maximum cavity

SCREEN 2 SECOND SCREEN


Sales Force
o Feedback from Sales and Services
o Feedback from Retailers

Customer Reaction
o Wants Le Petit to have all features that competing brands have in common

STAGE 2 - DEFINITION
Wishlist to technologically and economically feasible solutions
o Quality Function Deployment

Financial analysis
o Ensure the previous sacks were justified

PROPOSED PROJECTS

ONGOING PROJECTS

SCREEN 3 DECISION ON BUSINESS CASE


Modified PIC

Product Protocol
Decision to spend heavily Go/ Kill Target Market Definition
o Premium segment with highly innovative product Competitive advantage for Le Petit o Survival needs targeting Price Sensitive market

Product Concept
o Concept sheet for Innovative Liberte o Concept of Modified Egalite

Positioning Strategy
o Innovative Liberte - For premium segment, based on Quality
o Modified Egalite - Existing brand, no promotion required, targeted to lower segment for sales volume (Aiming Profit margin)

PROPOSED PROJECTS

ONGOING PROJECTS

CONCEPT SHEET(CUSTOMER PERSPECTIVE)


Features

Benefits
Pricing Offering Varieties Availability

Modified PIC
Background o Profit margin declining due to lowering price to compete the Japanese and

European players and R&D at standstill due to lot of projects and resource
limitations Focus

o The specialised focus need to concentrate at the respective product


segment:
Liberte: Quality management along with competitive pricing. Egalite: Flexible product to cater the middle and lower end market at cost effective model to generate revenue for the R&D process.

Goals and Objective


o To compete and sustain in the hyper competitive market.
o In short term the focus to be more on the cost part and bulk selling to generate revenue. o The positioning of the low end product should also do carefully so that it may not tarnish the image of the company. o In longer run, the company can work for their premium product in order to enhance brand image and better profitability.

Guidelines
o The products are highly innovative and first to market. o Reduce cost wherever possible without compromising much on quality.

PRODUCT PROTOCOL (LIBERTE)


Target Market - High End Quality concerned customers

Positioning - High Quality at competitive price.


Product Attributes
o o o o Artificial Intelligence (Fuzzy logic) Long lasting Grill material Multiple Sensors Quick Heating Model

Competitive Comparison
o Quality

Augmentation Dimension-

o Improve Aesthetic Differentiation o Upgrade with electronic user interface

Timing
o Developed and Launched in 12 months

Market Requirement
o Cross Functional Team to integrate R&D and Marketing Team o New promotional and Advertising Strategies.

Financial Requirement
o Artificial Intelligence and Sensors should not exceed 70lakhs(FF) with 20% tolerance o Quick Heating Model Should not exceed 155lakhs (FF) with 10% tolerance

Production Requirement
o Quality should be given utmost importance
o Efficient logistics and transportation to reduce cost(where ever possible) and avoid delays

Corporate Strategies - Serve upper end market with supreme quality product at competitive price through:
o Lower cost design o Automated Manufacturing Facility o Improvement in operation o Global Component Sourcing

Key Potholeso Monetary and Human Resource are in crunch.


o Delay in major modification and up-gradation. o Hypercompetitive market leads to fierce price war.

STAGE 3 DEVELOPMENT
Testing, Marketing and Operational Dimensions

SCREEN 4 POST-DEVELOPMENT REVIEW


Development is reviewed and checked Detailed marketing and operational plans

STAGE 4 VALIDATION
Product, Production, Consumer Acceptance User/ Field Trials

SCREEN 5 PRE-COMMERCIALIZATION DECISION


Last stage where you can kill
Financial analysis

STAGE 5 COMMERCIALIZATION

PLAN

OF

ACTION

Short Term Goals More Sales Volume Increased Profit Margin Financial Support for R&D

Long Term Goals

SHORT TERM GOALS


Time Period- Reduces from 12 months to 6 months.

Modify Egalite to low cost version.(Customer Satisfaction)


To target the lower segment. To compete with the existing products in the same segment.

Consumer Acceptance
One touch cooking and expand recipe offerings(to compete with current models)

LONG TERM
Time Period- Reduces from 18 months to 12-14 months.

Artificial Intelligence line of Liberte appliances with:


o Multiple Sensors. o Fuzzy Logic Intelligence

o Larger Cavity Model


o Quick Heating Model with powerful Magnetron. o Improved Aesthetic differentiation.

o Long lasting Grill Material.

POOLING
o Marginal Cost Incurred o Remaining time of Completion o Market response

OF

RESOURCES

All the selected ongoing project are shortlisted on the basis of two parameters:

Modified Egalite
o Resource Required- 72 person month (72/6=12).Therefore,12-6=6 more people are required. o Cost incurred- 2 Crores + 10% o Additional Comments-Some human resource (R&D) can be liberated from by dropping other projects

DECISION ON PROJECTS
ONGOING MICROWAVE OVEN R&D PROJECTS No Project Description Number of Months Reqd 5 Orginal NPV Comments of Project (FF) 16,000,000 Market feedback from retailers Sales & Service feedback. All major competing models have this

Improve external finish, Colors & contours to make them more aesthetically differentiated Change grill element material in liberte to extend life. Redesign the Egalite user interface for faster user input (one touch cooking ) and expanded recipe offerings)

3 7

3 6

7,000,000 13,700,000

PROPOSED MICROWAVE OVEN R&D PROJECTS


Resources Required Project Description (Person- Months) No of Modified TTC Engineers NPV of Project Comments

Liberte Innovative Model

306

12(18)

26(9) 84,00,000.00

Extensive Technology Development

Modified Egalite

72

6(12)

12(6) 2,40,00,000.00 Proposal from Marketing

Liberte Express

24

6(6)

4(4) 1,55,00,000.00 More powerful Magnetron

Thank You

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