EUROPEAN UNIVERSITY:
DBA Programme - New Product Development Seminar - Prof. A. Bianchi
McGregor Company: Organisation for new-product planning and development
In his long-range planning activities, Mr. Rodney Bruning, the president of the McGregor Company, forecasts the continuation of changing consumer buying patterns in the luggage industry over the next several years. He also recognises that the prospects for behaviour and the potential growth market will probably be accompanied by an increasing severity of competition. As a consequence of these and other factors, Mr. Bruning doubts whether the company's present program for planning and developing new products can meet the market challenges of the future. He is convinced of the importance of product planning and thinks possibly that his company needs to formalise, or at least to strengthen, the organisation and management of this function. He is concerned particularly with two aspects of product planning and development. One is the procedure for generating new-product ideas, and the other is the organisational structure needed to implement the planning and development of new products.
Established around the turn of the century, the McGregor Company today markets three seemingly unrelated lines of merchandise. With general offices and production facilities in New England, it is one of the largest manufacturers of luggage in the world. Soon after World War II, McGregor acquired a furniture company in Dallas, producing mainly folding tables and chairs. Recently McGregor added a line of desk accessories-calendar pads, pen holders, leather and plastic desk blotters, etc. McGregor manufactures some of these accessories and purchases others, but all are marketed under the McGregor brand. The luggage line accounts for roughly 60 percent of the company's annual sales volume, the furniture represents 35 percent, and the accessories 5 percent.
Historically, the luggage industry has been centralised in New England and the mid-Atlantic states, but today luggage manufacturers are found in many parts of the country. In fact, one of the largest in the world is located in Denver, Colorado, and another major producer is in Seattle, Washington. In recent years, a trend toward concentration has characterised this industry, thus lending support to Mr. Bruning's forecast of increasing competition. Ten years ago, there were about 470 luggage firms in the United States; today there are no more than 250. The largest company has possibly 25 percent of the market, and the second largest around 10 percent. Mr. Bruning estimates that 10 percent of the factories account for 90 percent of the world's production of luggage.
In luggage, McGregor manufactures and markets a complete line of men's and women's non-leather cases. Most of the products are vinyl-covered, over aluminium or magnesium frames, and are lined with a good quality of rayon cloth. The products are sold nation-wide directly to retailers. In addition, the company is becoming increasingly involved in foreign marketing. Management has franchised companies in Western Europe, Canada, South America, and Japan to produce McGregor luggage. This involvement in international marketing is another factor which has stimulated Mr. Bruning's concern about product planning and development.
In the American market, Mr. Bruning sees changes in consumer behaviour insofar as these people view luggage. It is no longer considered a once-in-a-lifetime type of purchase to be used until it is physically worn out. It is no longer just a utilitarian, heavy suitcase—i.e. a necessary burden for carrying clothes and other personal belongings. Mr. Bruning recognises that today the element of fashion has been introduced in luggage. Manufacturers and consumers are increasingly concerned with the factors of style and design. The increase in leisure time plus the higher disposable income have resulted in more time spent in pleasure travelling. This means more of a market for luggage. While luggage is still a popular item for special gift-giving occasions such as graduation, retirement, weddings, and birthdays, sales are no longer so concentrated on these occasions. New items are being added to the traditional suitcase-type products. Attaché cases, for example, have enjoyed increasingly widespread market acceptance, whereas the traditional briefcase has declined in popularity.
At the present time, there is no formal system for generating ideas for new products at the McGregor Company, nor does the company have any systematised arrangement for processing new-product ideas from their inception through to the commercial marketing stage. McGregor utilises a small, wholly owned subsidiary company for purposes of new-product research and for the styling and design of McGregor products. The subsidiary company's management is autonomous and independent--a state which Mr. Bruning insists must be maintained if the company is to fulfil usefully its unique function. Ideas are also filtered out of customer complaints as relayed to the company through its retail dealers. Any executive, of course, can make suggestions. The company has not adopted the commonly used "employee suggestion box" system--that is, a system of financial awards for worthwhile suggestions and ideas from employees. Sometimes new-product ideas come as a by-product of marketing research among consumers, as done by an independent marketing research firm.
As far as organisational or procedural arrangements are concerned, the style and design subsidiary company informally feeds information (new-product ideas or even models of new products) to one of the McGregor executives. Sometimes the executive vice-president or even the president gets involved in the initial stages of decision making as to the disposition--acceptance, test market, rejection, etc.--of the new-product idea or model.
To bring about more effective management of product planning and development, Mr. Bruning is considering establishing a new-product committee, consisting of himself, the president of the subsidiary company, the vice-president of manufacturing, the vice-president of sales and marketing, and the product manager (a staff executive) of the luggage division. This committee would have responsibility for evaluating all ideas and new-product models as presented by the subsidiary style and design company. If the pilot model received the tentative approval of the committee, a short production run would be authorised so that the product could be test-marketed by the research firm retained by McGregor. If the test-market results were satisfactory, the new-product committee would authorise full-scale production and marketing. By including all key executives on the committee, Mr. Bruning feels that a new product would be well received by manufacturing and marketing departments because the vice-president at the head of each of these departments would have already approved the product.
The vice-president of sales and marketing feels that the usual managerial drawbacks of committee action would render a new product committee ineffective as an organisational and administrative unit for product planning and development. Instead, he recommends that the company establish a new product-development department. In this way, the product-planning function would be recognised for the full-time activity that it really is. Such a department would devote an appropriate amount of time and effort to product planning over the long run.
The product manager, who reports to the vice-president of sales and marketing, has suggested that his domain of activity be enlarged to include the planning and development of new products. He argues that such an assignment is a logical extension of his present responsibilities. He could take a new product idea or model and carry it through all the development and testing stages. If the product were to be marketed on a commercial basis, it could be turned over to the appropriate department.
Requirements:
You are a Product Management Consultant, called in by the firm’s higher management to help out identifying better ways to remain competitive.
Analyse the case and give your “recipe” for the company to improve its way to manage new products (f.i.: ask yourself: do they have the appropriate organisational structure, can they improve the sources of new ideas, what else can they do in order to always have the product mix adequate to market demand, etc.)
Prepare a “consulting” report of no less than 1000 words; use graphs, charts, flow charts, etc, as you see fit.