Discuss the foundation of strategic capability
Part -1:
The Case: DESIGNING FOR DOLLARS
Great product design is absolutely critical for most consumer products companies. But how do these companies know when a design feature will pay off, especially when every dollar counts? How do they make those tough decisions? That’s the challenge that faced Whirlpool’s chief designer, Chuck Jones. He knew he had to come up with a better way.
Chuck’s realization that the whole process of making design decisions needed to be improved came after a meeting with Whirlpool’s resource allocation team. Chuck wanted to add some ornamentation to a Kitchen Aid refrigerator that was being redesigned, but it would have added about $5 in extra cost. When the team asked him to estimate the return on investment (that is, would it pay off financially to add this cost?), he couldn’t give them any data. His “trust me, I’m a designer” argument didn’t sway them either. Chuck resolved to improve the approach to investing in design.
His first step was the survey other “design-centric” companies, including BMW, Nike and Nokia. Surprisingly, only a few had a system for forecasting return on design. Most of them simply based future investments on past performance. Chuck said, “No one had really figured this stuff out.” With so many smart, talented people in their field why had no one been able to come up with a good way to make those decisions? According to two accounting professors, one reason is that it is incredibly difficult to discern designs contribution from all the other business functions (bargaining, manufacturing, distribution and ethics). And even the designs profession couldn’t agree on how to approach this problem. Despite the obstacles, Chuck continued his quest to find a way to objectively measure the benefits of design.
What he eventually concluded was that a focus on customer preferences would work better than a focus on bottom-line returns. If his team could objectively measure what customers want in a product and then meet these needs, the company could realize financial returns. Chuck’s design team created a standardized company¬wide process that puts design prototypes in front of customer focus groups and then gets detailed measurements of their preferences about aesthetics, craftsmanship, technical performance, ergonomic, and usability. They chart the results against competing products and the company’s own products. This metrics -based approach gives decision makers a baseline of objective evidence from which to make investment decisions. Design investment decisions are now based on fact, not opinion. The “you” decision-making approach has transformed the company’s culture and led the boarder designs because the designers can now make a strong case for making those investments.
Assignment task:
Based upon the information of the case, prepare an essay of approximately 820 words by completing the following tasks:
1. Critically analyse the strategic decision made by Whirlpool. Discuss carefully how the company initiated successful decisions and how each strategic level has been considered to compete in the market.
2. Critically evaluate the strategic development direction opened by Whirlpool for a wise investment decision.
————————
Part -2:
Baggage Blunders
Terminal 5, built by British Airways for 8.6 billion, is Heathrow Airport’s newest state-of-the-art facility. Made of glass, concrete and steel, it’s the largest freestanding building in the United Kingdom and has over 16 kilometers of belts for moving luggage. At the terminal’s unveiling on March 15, 2008, Queen Elizabeth II called it “the 21st Century Gateway to Britain.” Alas… the accolades (compliments) didn’t last long! After two decades of planning and 100 million hours of labour, opening day didn’t work out as planned. Endless lines and severe baggage handling delays led to numerous flight cancellations, stranding many irate passengers. Airport operators said the problems were triggered by glitches (malfunction) in the terminal’s high-tech baggage handling system.
With its massive automation features, terminal 5 was planned to ease congestion at Heathrow and improve the flying experience for the 30,000,000 passengers expected to pass through it annually. With 96 self-service check-in kiosks, more than 90 check-in fast bag drops, 54 stranded check-in desks, and over 16 kilometers of suitcase moving belts that were supposed to be able to process 12,000 bags per hour, the facilities design didn’t seem to support those goals.
Within the first few hours of the terminal operation problems developed. Baggage workers, presumably understaffed, were unable to clear incoming luggage fast enough. Many arriving passengers had to wait more than an hour to get their bags. There were problems for the departing passengers, as well, as many tried to in vain (unsuccessful) to check in for their flight. Flights were allowed to leave with empty cargo holds. At one point that first day, the airlines had no choice but to check-in only those with no luggage. And it didn’t help matters that the moving built system jammed at one point. Lesser problems also became apparent: a few broken escalators, some hand dryers that didn’t work, a gate that wouldn’t function at the new underground station and inexperienced ticket sellers who didn’t know the fares between Heathrow and various stations on the Piccadilly line. By the end of the first full day of operation, Britairt’S Department of Transportation, released a statement — calling for British Airways and airport operator BAA to “work hard to resolve these issues and limit disruptiarii fo passengers.”
Anyone might he tempted to think that all these could have been prevented if British Airways had only tested the system. But thorough runs of all systems “from toilets to check-in and seating” took place six months before opening, including four full-scale test run using 16,000 volunteers.
Assignment tasks:
1. Describe any strategic management theory and critically analyse which of these theories is applied at Terminal 5 of Heathrow Airport for immediate corrective actions.
2. Discuss the foundation of strategic capability and the concepts of competitive advantage then critically determine which of these concepts can be applied prior to the operation of Terminal 5, Heathrow Airport.
3. Analytically evaluate which important role of Benchmarking can be applied in the situation of the case.