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Mueller-Lehmkuhl Time Case
Describe the competitive environment facing Mueller-Lehmkuhl at the time of the case.
There are the two disadvantages faced by the company with comparison to the Japanese firm. The Japanese firm seem to have taken only one small segment -- the Automatic machine and converted it to a small guerrilla niche and though the market segment is small, it could hurt the company in terms of revenue because the Japanese do not have any cost overheads like this company that is incurred in customer service on sold manual machines. A portion of annual sales proceeds from both the automated segment and the manual segment is spent on servicing the non-returning manual segment which is draining away resources which the Japanese have avoided. On the other hand the analysis of demand shows from the table that the manual section is important and well could be made the company's forte in future if some costs are eliminated. The European market has its oligopoly broken, a fact that is common to all earlier firms which were four in number. The entry of the Japanese company has changed the equation. Now the customer loyalty faces a shift based on the other considerations like quality, service and changes in the fastener market...
Describe how the existing cost system works.
Primarily the problem is not competition from the Japanese firm. The primary problem stems from the futile cost that has been added to the services by continuing the type of fasteners that were manual and at the same time needed efficient and immediate service form the company. The company gives this service free of cost. The Japanese company on the other hand realizes that it cannot give in to this cost and has therefore stuck to the automatic model. While both have the same policies regarding the automatic machine, this company is facing a resource drain with the manual machines and service costs. That is the area that needs to be studied in detail. (As per Exhibit 4)
3. Discuss the current mix of fastener sales; given the cost generated by the existing cost system.
In the existing cost system, much of the revenue generated comes from the automated sector with buy back operations being cyclical and delayed. While on the other hand the expenses on the fasteners and the manual operation yields about $60,000 while the expenses in service has mounted beyond twice that sum. So it…
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