Thorborg Case

CASE STUDY 1 - ANSWER - PWI

In order to make decision, Thorborg needs to take into consideration a few things and current overall company’s situation:

1. Regardless of the fact that Company still has an inventory of the special steel material and finished goods on stock (completed steel rings), it is forced to start manufacturing of the new product - plastic ring. This is because cheaper and more lasting plastic ring entered market.

2. Competitor firm who produce plastic rings is not a real treat yet, but soon it could take some serious market share from PWI. This can significantly impact on PWI sales.

3. Whatever the decision is, pricing policy needs to be made (both for plastic and steel rings). Here, opportunities for cost reductions should be considered and analysed. This could be achieved through outsourcing.

4. Considering average life of both steel (2 months) and plastic (8 moths) rings, the price relationship might be at a ratio of 5:1 which means that five plastic rings is equivalent to one steel ring. This relationship however, can significantly change as the cost structure.

Considering all this, Thorborg needs to start planning and reassembling production lines for plastic rings. Meanwhile, sales department should increase intensity of selling steel rings. New substitute product is already selling by competitor firm at market and there is a possibility to take some serious market share. Going this way, Thorborg should reduce cost with outsource and reengineering production processes.

Also, in this situation, for Thorborg it would be very helpful to have deeper analysis and projection of future capabilities, costs and sales. Team work of all departments is essential.