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Snow Mobile – Turning Problems into Opportunities for Growth Executive Summary Essay

Case Study: Snow Mobile.Com – Turning Problems into Opportunities for Growth

Executive Summary

Problem

To position the Snow Tough as the best selling snow mobile in the market, the, “Camry” of snow mobiles overcoming a design defect in the product which is a potential safety hazard.

Alternatives

Do Nothing
Launch A New Redesigned Snow Tough
Launch a New Redesigned Snow Tough with Option of Switch Over at a Discount Price or refitting the existing vehicle at his own cost for Old Customers.
Redesign incorporating Safety, Recall old Snow Toughs and refurbish at company costs.
Facts Considered

·         Snow Tough is the leading product marketed by Snow Mobile Inc and is the basis for maximum sales of the company.

·         The hazard arising from the design defect of placing the battery compartment above the fuel tank has been empirically established and needs to be addressed.

·         Though there is no pressure from the customers and the environment for the change, this situation is not likely to last for ever.

·         The human, legal, ethical and long term image and interests of the company may need a review of the existing design to provide for greater safety and prevent loss of life.

·         A number of alternatives as stated above are available for sustaining the advantage

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of the company’s product the Snow Tough.

Recommendations

Incorporating the design changes and recalling the old Snow Toughs for modification at company costs will be expensive but in the long term interests and image of the company and is the alternative recommended.

Statement of Assumptions

·         The company’s financial condition is stable and it is regularly earning profits.

·         The Company’s credit rating in the market is reasonably high and it will be able to raise adequate capital to carry our necessary redesigning and production of a new model of Snow Tough

·         The Company has the capability to redesign and produce a new model within a period of one year.

·         The Company has a loyal base of sub contractors.

·         The position of the company in the Snow Mobile market is that of a leader.

Primary Problem

To position the Snow Tough as the best selling snow mobile in the market, the, “Camry” of snow mobiles overcoming a design defect in the product which was a potential safety hazard.

Identification of Satellite Problems

·         Redesigning Snow Tough was necessary keeping in view the design defect which had created a safety hazard due to wrong positioning of the battery above the fuel tank.

·         Redesigning from the safety point of view would involve recall of a number of Snow Toughs already in the market.

·         Recall of a number of Snow Tough machines and redesigning them would cause loss of revenue apart from costs of redesigning.

·         The management had to be convinced of the long term benefits of these measures for the company.

Implications on the Organization

·         Accepting that there was a defect with a potential safety hazard in the Snow Tough would shake the credibility of the customer in the product and the company.  This would cause substantial loss of revenue till the faith of the customer in the company was restored. Possibility of the company unable to recover from such a setback also needed consideration.

·         Recall of Snow Toughs from the market and redesigning would need substantial expenditure for the company. The revenue loss will have to be borne by the company.

·         There could be possible legal implications for the company in case relatives of those who had lost their life or suffered damage decided to sue the company because of the revelations.

·         A successful recovery would firmly establish Snow Mobile Inc as a credible, customer oriented and ethical player in the market and also place the Snow Tough as a premium product.

·         There would be a need to identify a new sub contractor in place of Sparky Ignition System. Other sub contractors may also lose confidence in the company.

Implications on the Personnel

·         The board could take a serious view of the lapses on the part of the management and the President as well as the Chief Production Engineer could lose their jobs.

·         Mike Moffat would lose his job for having persisted in indicating to the company the design defects in the product.

·         There could be a shake up in the production department of the company and resultant loss of jobs.

Alternative Solutions

Do Nothing

            Description. Snow Tough is an existing brand leader for Snow Mobile Inc which is contributing maximum to its sales profile so far. Its performance in the market has been very good and its target segment is the middle-middle and upper middle class white collar workers whose earning potential is constantly increasing over the years with the knowledge economy slowly taking roots in the country. The product has also a long history in the market since 1980 which will ensure a continuity of sales. The product was mechanically sound with high reliability, durability and safety apart from the wrong positioning of the battery over the fuel compartment. Thus there could be a strong case for continuity taking advantage of the existing strong image of Snow Tough in the market without undertaking major changes in design. The fall out of impact of lack of adequate safety of the product due to wrong positioning of the battery can be considered as and when such a situation arises.

Pros

·         The strong brand image of the existing product can be consolidated without having to undertake a review of the design or major changes.

·         There will be minimal expenditure on redesigning and recall of product.

·         The company management will not face any public embarrassment or reproof by the board.

·         Sub contractors will continue to repose their faith in the company and benefit from supply of existing products without having to carry out a review of the manufacturing processes.

Cons

·         Continued loss of lives due to accidents arising from the defective product would lead to loss of credibility of the product and the company in the long run.

·         Ethically the practice of the company in not rectifying the defect after it has come to notice will invite public admonition as well as legal action.

·         The long term credibility and survivability of the company will be in jeopardy once its laxity in not rectifying a defect which is unsafe to life and limb is noticed.

·         Competition will take advantage of the weakness in the product once it obtains information of the flaws therein.

Analysis. From the above it is apparent that the Do Nothing course while appearing good in the short term has serious long term legal, ethical as well as management challenges which will affect the survival of the company as well as the management. This option thus cannot be explored any further.

Launch A New Redesigned Snow Tough

            Description.  Redesign the Snow Tough overcoming the safety defect, without any public declaration of the existing problems in the machine. The customers will be satisfied with the new machine which is now seen to be refurbished and safer to operate. The management will not have any loss of credibility or profits and the product profile and history thus far can be exploited.

Pros

·         The existing product advantage can be exploited, without having to highlight the design defects of the battery box on the fuel tank.

·         The new product will invite customer queries and thus enhance sales.

·         A newly launched, safe vehicle would overcome any criticism of lack of safety consciousness in the company.

·         There will be no loss of revenue to the company.

Cons

·         The tacit admission of defect in the existing and old models of Snow Tough without rectifying defects will not go down well with the existing customers.

·         There could be protests including legal action by the existing customers, leading to ultimate decline in the customer base.

·         Abdication of ethical responsibility by the company will not be in conformity with the overall management principles.  This would go against the long term interests of the company.

·         Loss of existing customer base can be anticipated as they would feel let down by the company for short selling them a defective product.

            Analysis. The alternative appears attractive as it does not involve any additional outlay in refurbishing the existing fleet and at the same time could provide the company benefits of launch of a new platform enhancing its product line at low cost. However the lack of concern for safety of the existing customer, its avoidance of accountability and responsibility will not go down well in the industry and this option will only be beneficial in the short term.

Launch A New Redesigned Snow Tough With Option of Switch Over at a Discount Price or refitting the existing vehicle at their cost for Old Customers.

            Description.  This will involve redesigning the Snow Tough as per the alternative above, however providing the existing customer an option of switch over to the new vehicle with improved design at a discounted price or refitting the existing vehicle at his cost. This option envisages passing the benefit of the redesigned vehicle to the existing customer without having the company having to bear the cost of transfer.

Pros

·         The proposal will benefit the old as well as the new customers.

·         The existing customers will be provided a loyalty bonus of discounted price or can refurbish their old vehicle at his cost. Thus safety would be enhanced in both cases.

·         The company will have substantial savings in revenue as well as enhance its sales of the new vehicle as well as the modification kits for the existing vehicles.

·         Overall revenue enhancement for the customer.

Cons

·         The company would be seen to abdicate its responsibility to its existing customers as it is only partially passing on the benefits of a redesigned vehicle.

·         The company will be seen to abdicate its responsibility to its old customers. This is likely to affect its overall customer loyalty profile in the long run.

·         The overall image of the company in the industry as well as amongst its customers will suffer.

·         Consumer complaints may come up which will have to be faced by the company.

            Analysis. This is an attractive option in which the company does not lose any revenue, while at the same time brings out a new model in the market and upgrades the existing one. However this will be at the cost of building customer loyalty in the long run and may even lead to legal, ethical and consumer issues. The old customers would certainly feel cheated and be driven away from the company by the competition.

Redesign incorporating Safety, Recall old Snow Toughs and refurbish at company costs.

            Description.  This alternative involves redesigning the Snow Toughs incorporating safety, recalling the old Snow Toughs and refurbishing these at company costs. This will involve substantial outlay of expenditure to be borne by the company for modifying over 8000 vehicles.

Pros

·         This is a complete solution, which will stand the company in good stead in the long run establishing its credibility as a responsible and publicly aware company acting in the best interests of the customers.

·         The primacy given to safety and the responsibility that the company bears for the same even in the old model will enhance its image and fulfill its ethical obligations to its customers.

·         Legal and consumer complaints will be avoided.

·         This will be in conformity with the best practice in the industry. Many such instances of total recall of product once a defect is discovered particularly one which is against the safety of life and property are known. The salient one is that of Johnson and Johnson which recalled the drug, Tylenol, from the US market in 1982 and 1986 suffering a loss of millions of dollars but eventually went on to recapture its market share based on the ethical considerations of the company. (Johnson and Johnson, 2006).

Cons

·         There will be considerable cost outlay in recalling, refurbishing and satisfying the existing customers.

·         Some of them will not be convinced and may go to the consumer or legal courts for redress and compensation.

·         The company’s image will suffer during the short period of recall and relaunch.

·         The competitor will fill in the space that exists between the declaration of safety hazard and launch of a redesigned vehicle leading to loss in market share and thus revenue.

Analysis.  This will be in the long term interests of the company. While there would be considerable costs involved in refurbishing 8000 vehicles, this will be more than made up in building up the loyalty base as these as well as other customers will continue to be loyal to the company. The company brand will be established as consumer oriented, ethical and with long term view of the prospects which will ensure its sustained growth.

Recommendations

 Keeping the overall management perspective, the final alternative of redesigning Snow Tough incorporating safety, recalling old Snow Toughs and refurbishing these at company costs is recommended. This is a bitter pill which the management will have to swallow temporarily, but it will have a salutary impact on the company’s image, profile and bottom line in the long term. It will pitch fork the company from merely a manufacturer of snow mobiles to a brand builder, who is conscious of its responsibilities towards the customers. The company also has the advantage of carrying out the necessary redesigning during the current summer season before the onset of snow; thereby the customers will not be denied use of the existing vehicles during the actual period of utility.

      The first step will be for Mike Moffat to convince the present President the viability and long term value of the recall of old machines and refurbishing them at company costs. A reasonable management will be willing to accept the logic of such sound advice in the overall interests of the company; alternatively he may have to sound the Board. Undoubtedly this will impact on his personal position in the company which may well be compromised as indicated by Robert Blinky, the Chief Production Engineer, but if it takes place and he loses his job, it will only be a temporary set back for him. He would have achieved his aim of caring for the safety of the people using the product and in all likelihood his reputation for uncompromising ethics will provide him many openings ahead.

Implementation

Immediate Action – Present to Six Months

  The immediate action required of Mike would be to convince Robert Blinky and the production team to come out in the open with the defects in the design and convince the President as well as the Chairman and the Board of management of the need to go public at the earliest with the findings while also highlighting the remedial measures being taken by the company.

            This should simultaneously follow redesigning for safety for which the sub contractor could also be taken into confidence and the defects noticed could be eliminated with a coordinated effort which is not beyond the current manufacturing competence.

  Recall of the 8000 snow mobiles should also be undertaken concomitantly. There would be massive financial outlays for which assistance for funding from banks and other credit agencies could be taken so that the expenditure is spread over a period and the company does not go into virtual bankruptcy due to these high costs.

   A public relations campaign giving out the ethical considerations on which the company has taken this decision, the measures being taken to provide for safety and that old customers are being provided these benefits at company costs can be highlighted to avoid the competitors from taking benefit of the slack to wean away customers from the company.

            Simultaneously preemptive action will have to be taken to prevent any legal or consumer rights fall out arising from the self declaration by the company.

Short Term Action – Six months to One Year

            This will be the most turbulent period for the company. It will be coming under increased pressure of finances due to the enhanced expenses of the requirement to refurbish old Snow Toughs, satisfy the customers who will be reviewing the performance of the machines and overcome the challenge from the competitors.

            A time table for refurbishing the old Snow Toughs should be set and within this period all existing machines should be refurbished.

            Simultaneously the design of a new totally safe machine will ensure that the company maintains its lead in the product category in the market. This should be launched within the year.

            There may be some resistance from the consumer and legal action which some of the old customers may undertake but this will be minimal given the positive pre emptive action taken by the company and will be taken in its stride.

Long Term Action

            The launch of a refurbished Snow Tough along with renovation of all old Snow Toughs should be completed and the company should now undertake the exercise of building its brand as a safe, responsible and customer oriented corporation, to launch new products and suppress the competition which would have had some success during this period of turmoil in Snow Mobile.

References

1.         Johnson and Johnson. 2006. http://www.jnj.com/our_company/our_credo_history/index.htm. (13 July 2006).

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