- Analyze the Opportunity at Elite Electronics Vignette in Chapter 5. Discuss whether Elite should grab the new ADC and run for the pot of gold or play it safe and wait for more proven technology and competitive sources. Consider the advantages of being first to market compared with waiting for someone else to sustain the costs of working out the issues. (Hint: Develop an expected value analysis of the two alternatives).
In my opinion, Elite should run for the pot of gold and become the first company in the market to offer the low priced oscillators to the consumers. According to the case study, there is a 40% chance of going wrong. This is less than 50% for a new product. Elite should acquire the ADC by Gamma.
The case study states that the marketers at Elite believe that there would be 10000 product sales for the new and cheap oscillators and then for the next 4 years sales would stay at around 6000 per year. One of the quality of world class firms is that they introduce new products to the market that makes them the market leader in their respective field. Of course, there will be risks but they are worth taking than waiting for other firms to introduce the same product and taking the leading place. The design and production of new items should be carried out by a team of representatives of all functional areas, at Elite for better results. Therefore, there must be the representatives from marketing, product planning, design engineers, supply management, manufacturing engineering, selected suppliers and other department involved in the production of the new oscillator (Burt, Petcavage, Pinkerton & Burt, 2010).
The second alternative that has been discussed in the case study is to wait for someone else to sustain the costs of working out the issues. This is in my opinion a passive approach towards production of a product. There is a probability that the other firm has a great success and become a market leader for that specific product that Elite has an opportunity to introduce to the market.
- What is the purpose of specifications? Compare complex versus simple specifications. Provide an example of each and explain your reasoning.
Firms try their best to reduce the total developmental cost of their products and services without compromising the need to meet the needs and of their customers. For this purpose the suppliers and supply managers work together to develop and improve the specifications of these products and services. There are different aspects of the purpose of specifications. Following are few of these purposes (Burt, Petcavage, Pinkerton & Burt, 2010).
- In strategic Supply Management, the supply management wants to communicate to the suppliers what are the requirements of the products they want to buy.
- Specifications help in establishing the provision of tangible goods and intangible services.
- Specifications establish the standards for quality testing and inspections.
- Individual departments and their relevant suppliers may have different costs for the desired products and services in their minds. Specification makes sure that there is a balance in these cost between the individual departments and the suppliers.
The nature of specifications i.e. complex or simple has a bigger role to play in the purchasing decision of a product (Wong, McFarlane, Zaharudin, & Agarwal, 2002). Following is the detailed description of complex and simple specifications.
Complex Specifications: Complex specifications are also called as detailed specifications. This is the exact description what the buyer is demanding from the seller. These details are not limited to just the quantity of the product or the design of the product. In fact these specifications are related to many aspects of the product including what was the method it was made with, how it was transported, what is the warranty or guarantees included and what are the different service charges if any. For example if you go to an electronics store and want to buy an LCD, the list of complex specifications would include the make and model of the LCD, the technology that has been used to make the LCD, what is the electric consumption of the LCD, what other devices does it connect to, picture quality in Pixels and how did this LCD end up in the US if was made outside of it etc.
Simple Specifications: Simple specifications are limited to just a few details of a product. For example for the same LCD, the list of simple specifications would be the length of the LCD, the make of the LCD and its price.
- What factors should be considered when making the decision to lease or buy equipment?
Leasing or buying equipment is a fundamental decision that has to be made in the procurement process for organizational operational assets. Leasing refers to obtaining an asset on rent for a certain period of time. Buying on the other hand is purchasing an asset as an owner of the asset. The decision to lease or buy is never easy. Following are some of the factors that can help make this decision productive for a business.
- Determine what are the operating advantages and disadvantages of either to lease or buy.
- What is the present value of the asset? How long will the company need it for? What would be the value of the asset when it has been used? After these considerations, leasing or buying decision can be made.
- Operational point of view is very important. It has to be assessed if leasing is more favorable than buying looking at the operational costs of both the alternatives.