Le Petit Chef (lpc)

Le Petit Chef (LPC) Team 1 Janice Farone Paul Gebel Bill Howe Art Zion

Tablé of Contents  La

crise

◦ Identifier ◦ Recommander  Stratégie

◦ Technologie ◦ Culture ◦ Compétences de base  Architecture

du produit

intégrée de la conception

◦ Le marché ◦ Fondement de la concurrence (courbe en S Stretcher)

The Crisis According to LPC  LPC

recognized the need for a low-cost model, but there was interdepartmental strife between R&D and Marketing ◦ Cost reducing Egalite was a waste of effort (Engineer quoted saying, “…trying to trim a Mercedes down to a Fiat.”) ◦ Engineers were dismissing Egalite as a viable product

 The

crisis was aggravated by several contributing factors ◦ R&D expenditures were twice the industry avg. as a % of sales ◦ Resource contraints due to concurrent 7 projects ◦ Briggitte wondered if she should ask for more

The Crisis According to Team 1  Brigitte and Senior Mgmt are not addressing the right problems ◦ The strategy was built to compete in the first stage, but the market was in the fourth stage ◦ “We have already realized all possible cost reductions… Still above competitor’s cost levels… The proliferation of new model/accessory combinations in the Liberte and Egalite lines has added substantially to manufacturing complexity.”  Increasing

competitive pressures and new entrants from larger European players that have moved upmarket away from the low cost Asian producers ◦ Asian low-cost suppliers developed fuzzy logic based controls

The Crisis According to Team 1 (cont.)  Can’t

succeed in the low end, because of the inherent costs of an integral architecture  Marketing decisions are being made by the R&D head ◦ Origins of the company ◦ Culture is geared toward developing features for their perceived consumer demographic ◦ They want to dump money into R&D  Le

Petit Chef’s competitors had successfully closed the performance gap ◦ In response to this, LPC’s decision reflected the active inertia of their senior management ◦ They wanted to do what they always do - only

Strategy  Corporate

strategy

◦ They sustain innovations (i.e. S-curve stretchers) ◦ The closeness to the customers, and resultant up-market movement is the foundation of Le Petite Chef’s success (Virtous Cycle) ◦ Products differentiated on technical innovation and performance features  Technology

Strategy

◦ R&D leads the development, refinement, and selection of products that go to market ◦ They select the projects that get funded

Basis of Competition Built

for, and operating in the first stage of the basis of competition ◦ Market has already moved onto the fourth stage, but Le Petite Chef is still in the first stage

Price

and visible feature differentiation is paramount to competition in this market ◦ (p.7) “Main priority is meeting our customers’ needs by maintaining the technical and innovative edge of our products which underpins our strategic

Integral Model Is

it integrated product architecture/vertically integrated ◦ R&D staff worked closely with manufacturing, sales and service ◦ Technical skills ◦ Le Petite Chef holds a lot of tacit knowledge surrounding French… Losing market share. Is market shrinking? Are they losing value? Low cost product is coming up underneath them, because other firms have moved up market

◦ No one wants to compete head-to-head

Innovator’s Dilemma Innovator’s

dilemma

◦ Signs… maintained price premiums by renewing product offerings frequently ◦ 10 year momentum of profits… They experienced their first loss ◦ Revenue stream… ◦ Impossible to sustain premium prices for new models (i.e. the customer is no longer willing to pay – see Exhibit 11).

Integral Architecture for Product Design 



In most industries there will simultaneously be pressure to integrate product designs and value chains and disintegrate them. Two factors encourage integral product designs and integrated value chains: ◦ The desire to squeeze maximum performance out of a given set of component technologies and product architecture. This is “S-curve stretching.” ◦ Uncertainty related to possible new technologies. This is a reluctance to do “S-curve jumping.”



One factor encourages modular product designs and disintegrated value chains: ◦ Market pressures related to incremental product performance improvements, time-to-market, and costs.

Analysis of LPC Business Model  Evidence

for vertical integration

◦ The organization is driven by the R&D product development ◦ The organization encouraged strong crossfunctional coordination and cooperation ◦ Vertical integration is shown through their strong control over suppliers and outbound logistics ◦ Recent market developments: Asians are more modular, due to fuzzy logic attribute  Market

inferences

◦ Notable success, possibly due to modularity ◦ Asian manufacturers have taken the low-

Recommendations A.

Move into Stage 5 to provide “customer wow” as a niche player, but to a shrinking market (“Innovative design” and “high performance”) ◦

Pros: Consistent with current strategy. Could delay shrinking market.

◦

Cons: Shrinking market. S-curve has assymptoted. Diminishing returns.

B.

Court an Asian low-cost producer, by leveraging their brand identity to outsource production of microwaves ◦

Pros: Acquire the core competencies of a modular approach. Low-cost option

◦

Cons: Built around R&D, which would experience drastic cuts (possible “Pro”). Cannot be the lowest low-cost, and can only retain limited differentiation.

C.

Internal Modularity – Spin off a subdivision for low-cost “fuzzy logic” production ◦

Pros: Remain vertically integrated, which emphasizes core competencies. Gain the benefits of a disaggregated value chain in a modular approach

◦

Cons: Destroy all tacit knowledge inherent to the informal interactions

D.

Exit Strategy ◦

Bailout (Ask President Obama for a Billion dollars, and install a microwave in every

Microwave Oven Cook-Off Performance Test Data