Situation: Husky Company is an established reputation of high-quality mold maker, which is known for charging a premium for its products. The company produces machines that take into account the current technological innovation, efficiency, durability, and reliability. At the end of July 1995, Husky’s revenues were 609S million, which grew by 53% compared to the previous fiscal year. The net income was $50 million, which is twice the number in 1994 (Rivkin 13). Despite these positive results, Husky’s demand is weak in the PET portion of the market and its sales are expected to decrease next year.
Complication: With the entry of competitors with substitute PET business models coupled with lower cost of the similar products company’s sales are expected to decrease for the coming year. Husky Company needs to come up with new strategies to avoid the possible revenue loss in the future.
Solution/Recommendation: Husky used to be a highly differentiated company since it produced unique, high-quality products that created value for its customers for which they were willing to pay a premium price. The entrance of competitors, like Nestle that introduced a substitute for PET systems with 20% lower price and relatively same quality products caused Husky to lose its value as well as differentiation. According to the case, “the injection molding machine has become a commodity” (Rivkin 13). Therefore, Husky became “Stuck in the Middle” company; it neither has differentiation, nor cost leadership strategy that distinguishes it from the rivalry. Noteworthy, Husky has been operating on a hiked price mechanism. Therefore, the resultant entails financial constraint, loss of customers and national and international dominance. Husky needs to improve and strengthen its business position by offering the products for lower cost, therefore, engage in a price war with competitors. The strategy will enhance its status over the substitute products due to affordability and make it hard for other competitors to utilize the PET business model. Husky will remove various obstacles it has generated from the competitors, by encouraging the power of bargaining ability of the customers.
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Moreover, Husky has to invest heavily in R&D and innovate to bring new technological developments into the market, with a focus on current environment-friendly and sustainability trends, such as minimizing waste and recyclability. Constant technical efforts will make company’s machines highly efficient, more reliable and faster producing (Rivkin 5). Neww sophisticated machinery will consequently open up new markets. New unique markets will recreate the value lost; therefore, differentiate Husky line from its competitors.
Besides, Husky needs to extend its product line and expand product range, almost 70% of the Husky line focuses on producing PET system, which highly contributes much to company’s profitability. It is good to note that PET production pulled the company out of bankruptcy and helped to establish it as a leading firm in such niche market. However, with the introduction of PET substitute, Husky needs to adopt the virtue of diversification, exploiting other forms of business apart from its current business. Diversification in industry supports business ecosystem in that when the market of one product is small; the different product market is its peak. Some of the examples would be molds, robots, or automotive and technical since the firm is not present in such demand.
Other recommendations include increasing production volume of machines. Husky produces less than 300 devices per year, which is almost five times less than its competitors, which is small by industry standards and could not lead to economies of scale.
Husky needs to provide stricter approaches to its salespeople to boost productivity. Concerning this, the company will be forced to add new highly trained staff coupled with marketing professionals as well as long-term actions for the long run. According to the case, Husky believed to have the most active service level and consultation in the industry (Rivkin 10). Therefore, they used many of its former service people as salespeople. However, it doesn’t mean that they enough sales expertise. The marketing department is responsible for the sales performance of the products both nationally and internationally. Its work is to find suitable ways company products can thrive on the market based on the competition of the substitute products. To provide an excellent solution, Husky needs to take care of the sales, the team for example, by offering them better remunerations packages coupled with policies on the individual sales performance and actual products productivity. Better wages boost the morale of sales team and bring in new techniques the products can encounter the substitute products both on the national and international markets.
