Mueller-Lehmkuhl Time Case Describe the Competitive Environment

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 created by probable new entrants encouraged by the Japanese.

2. 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 is evident that while the section for the automatic system can be made less costly as compared to the Japanese in future by increasing the sale of such machines that need no servicing, similar effect with regard to the manual machines can be done if we consider reducing the cost of service and after sales service.

4. How to change the firms pricing strategy to compete better with the Japanese? what are some of the important issues to consider before implemented this change..

The primary difference was in the way the second costing was done as per exhibit 8 with the company adding the setup cost labor cost and the other costs that were in the long run dead investment for the parent company and also strapped in the overseas producers to the company functioning and production policies. On the other hand the Japanese have given a; larger autonomy to the franchisees -- that is the way they have treated the overseas partners and this change shows that the costing of their company relatively disposes some of the labour overheads to the agents -- localizing it. Thus efficiency is achieved by localized adaptations of the units to individual market segments. This autonomy enables the reduction of cost and increase in efficiency. The Japanese it is shown have moved the production process from the tailor made model to the assembly model giving them a cost advantage. They have timed the entry to suit the automatic sector in such a way that this feature is possible.