ARAB OPEN UNIVERSITY FACULTY OF BUSINESS STUDIES (MBA) B 716 I MANAGEMENT: PERSPECTIVE AND PRACTICE TUTOR MARKED ASSESSMENT – Fall 2016/2017 SEMESTER I B 716 I TMA 02- Fall 2016/2017 Semester I Cut-off Date December 17th, 2016 (23.hrs GMT) Please read these instructions carefully, and contact your tutor if you require any further clarifications. You should submit your completed assignment to your tutor to arrive no later than the cut-off Date December 17th, 2016 (23.hrs GMT) Please use standard A4 size paper for submitting the hard copy of your TMA02. Your name, personal identifier, course and assignment numbers must appear at the top of each sheet. A soft copy of your TMA02 must be uploaded to the university moodle within the indicated cut-off date. The hard & soft copies must be identical. Please leave wide margins and space at the end of each sheet for tutor comments. It is better to use double spacing so that you can easily handwrite corrections to your drafts and tutors have space to include their feedback on the script. Start each question in the assignment on a new page. Requirements to pass the module The assessment of B716 I comprise of two components: 1. Continuous assessment in the shape of two tutor-marked assignments (TMAs). 2. A final 3-hour written examination. In order to pass the module, you must obtain marks of at least 70% in each of these components. Both components must be passed separately. All assignments must be submitted electronically by the stated deadline. If you fail to submit a TMA, a zero score will be registered. If you fail the continuous assessment on aggregate, i.e., do not achieve 70%, you will be required to retake the module. Your passed TMAs, however, may be ‘banked’ and (subject to important conditions), if you retake the module you will not be required to submit TMAs you have already passed. In addition, you are required to have gained a satisfactory attendance at the B716 residential school. Failure to undertake this compulsory element of the module will result in an outright fail result for the module, despite other assessment scores achieved. You are required to submit 2 TMAs for the overall continuous assessment component of B716. You have to prepare 1 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I a TMA at regular intervals throughout the module and submit it to your tutor. For summative purposes, each TMA is marked out of 100. Please use standard A4 size paper for submitting the hard copy of your TMA02. Your name, personal identifier, course and assignment numbers must appear at the top of each sheet. A soft copy of your TMA02 must be uploaded to the university moodle within the indicated cut-off date. The hard & soft copies must be identical. Please leave wide margins and space at the end of each sheet for tutor comments. It is better to use double spacing so that you can easily handwrite corrections to your drafts and tutors have space to include their feedback on the script. Start each question in the assignment on a new page. Completing and sending your assignments When you have completed your TMA01, you must fill in the assignment form (PT3), taking care to fill all information correctly including your personal identifier, course code, section & tutor, and assignment numbers. Each TMA01 and its PT3 form should be uploaded on the AOU branch moodle within the cut-off date. Late submissions require approval from the branch course coordinator and will be subject to grade deductions. All assignments are treated in strict confidence. If you feel that you are unable to meet the cut-off date of the TMA01 because of unusual circumstances, please contact your tutor as soon as possible to discuss a possible extension to the cut-off date. Plagiarism The Arab Open University Definitions of cheating and plagiarism According to the Arab Open University By-laws, “The following acts represent cases of cheating and plagiarism: • • • • • • Verbatim copying of printed material and submitting them as part of TMAs without proper academic acknowledgement and documentation. Verbatim copying of material from the Internet, including tables and graphics. Copying other students’ notes or reports. Using paid or unpaid material prepared for the student by individuals or firms. Utilization of, or proceeding to utilize, contraband materials or devices in examinations.” When producing academic work, convention dictates that we give credit to other people’s work when we cite their theories or research findings. This means stating where concepts and ideas you have used in your TMA come from, if they are not your own original thoughts. Therefore, if you are using others' ideas or quoting from other sources in briefing notes or proposals, you will need to reference these as well. 2 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I • • It is good academic practice to include literary citations and a reference list. Citations can be from multiple sources, including module materials, module readers and set books, academic journals, books, magazines, newspapers and websites. All of them require an appropriate reference.. Use sources concisely, so that your own thinking is not hidden behind your presentation of other people’s views. The basic principles of referencing are that you should give credit to authors whose original work you are using, and that you should give enough information for a reader to be able to find the original source. Failure to give credit to the original author is plagiarism, or academic theft, which is a serious matter. Penalty on plagiarism The following is the standard plagiarism penalty applied across branches as per Article 11 of the university by-laws: 1) Awarding of zero for a TMA wherein more than 20% of the content is plagiarized. 2) Documentation of warning in student record. 3) Failure in the course to dismissal from the University. All University programmes are required to apply penalties that are consistent with the University by laws. Examples of Plagiarism Copying from a single or multiple sources, this is where the student uses one or more of the following as the basis for the whole, or a good part, of the assignment: • Published or unpublished books, articles or reports • The Internet • The media (e.g.TV programmes, radio programmes or newspaper articles) • An essay from an essay bank • A piece of work previously submitted by another student • Copying from a text which is about to be submitted for the same assignment In your research , you should have explored both academic (e.g. journal articles ) and nonacademic services (e.g., websites), examining the underlying assumptions of the theory or model you chose. You should have also identified the benefits and challenges, weaknesses and strengths of the models and theories. 3 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I Case Objectives: GPS-to-GO is a very successful company that has a wealth of brilliant researchers and scientists who have created the most advanced global positioning systems in the world for the complex air-traffic control and logistic systems. Now the vision of Michael Scott, one of the up and coming managers, is to use GPS-to-GO’s knowledge to dominate the consumer market with premium-priced and feature-rich GPS units. Even though GPS-to-GO is light years ahead in terms of GPS technology, the consumer market demands low-cost units and yearly follow-on products, which is far different than the typical five- to 10-year government or retail project. Thomas must decide how to meet the cost target and market window for the new product, while working with the same engineering group that caused the unit manufacturing cost (UMC) problem in the first place. Refer to PDF file Case Study: GPS-TO-GO TAKES ON GARMIN The attached case document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014.Permissions@hbsp.harvard.edu or 617.783.7860 QUESTIONS: Question one (Up to 50% Marks): (1250 words +/- 10 %) Discuss what options Thomas has to reduce the overall product UMC (market, material and labor) to meet the target cost, and explain each option in relation to the case provided. Note: students should draw on evidence beyond the course material or only on the case study. For contextualization, connectivity, and understanding, candidates should have an understanding of in unit III , and unit IV chapter 1, sessions 2.2 and 2.3 Question 2 (Up to 50 % Marks): (1250 words +/- 10 %) In terms of GPS-to-GO’s management, discuss the importance of revenue and earnings, and explain critically what can be done on future projects that will enable the team to meet cost targets. “For top marks students will need to show command of academic literature beyond the course material (including appropriate citation and referencing).” Note: For contextualization, connectivity, and understanding, candidates should have an understanding of in unit III, Unit V chapter 1 session 1.2 and chapter 3 session 3.1 4 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I Assessment criterion Engagement with theory Use of evidence Level of discussion Description In all TMA submissions students should be engaging with concepts, frameworks, models and theories which are drawn from their work on the relevant units of the module. They should always explain the theory, rather than list bullet points. Bullet points do not demonstrate an understanding of the ideas, but rather display memory only. Students must show you that they have fully grasped and presented the ideas in their terms, not only that they can repeat them. Evidence will inform both the way that students critique theory and how they demonstrate their understanding of it. They should give practical examples from their own experiences and practice, or an organisation they know well, in order to provide strong evidence for their arguments. Likewise, they can offer evidence and illustrations for their arguments from the module materials. They must always link their examples to theory, otherwise it is just description and not analysis. They should attempt to weave the theory and evidence together, rather than having large chunks of text about the theory and then large chunks of text about ‘evidence’, as the latter inevitably ends up being descriptive rather than analytical and can feel contrived and difficult to write. At Masters level, simple answers and essentially descriptive reports are not adequate. Student TMA submissions should present a level of discussion in which their consideration of evidence and theory takes account of competing positions and elements of contrast, comparison and evaluation. Their work should demonstrate a Masters' level of critical analysis, where appropriate. The dialogue between theory and practice should inform their discussions. They should develop the arguments they are making and situate them in relation to other views and perspectives, which may be supported (or not supported) by the theory. They need to be sure that they answer the question set! General Marks (Up to 20% Deduction) Marks distribution: This assignment will be graded out of 100 marks, which will be allocated to your answer for the three questions. 20% will be deducted based on the following criteria: • • 10% for improper referencing (5% in-text referencing and 5% end-text references). 10% for non-adherence to specified word count. Word count for TMA submissions • The overall word count is 2500 words (+/- 10%) (Excluding References). 5 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I TMA Objective & Guidance: Please prepare your views to the following questions in light of the information presented in the case. Tutors should organize and lead his/her candidates’ responses into the following three categories during TMA review in the classroom. Your answers must defend your point of view. Moreover; candidates are suggested to take into consideration the following. Guidance to Question 1: The discussion should relate to the biggest internal roadblock for Thomas is going to be an impatient Scott, whose vision of GPS-to-GO’s future is profitable dominance in the consumer GPS market through leading-edge technology. There is no doubt that the technology ultimately included in GPS-to-GO products will be superior to the competitor’s, which is part of Scott’s vision, but this does not guarantee sales. Also this does not prevent other well-established players like Garmin from throwing some unique technology into the mix. The next big hurdle will be with the design team that is racing to place some of its inventions into the new product at the expense (sorry for the pun) of product cost. Thomas has to make sure that he aligns his strategy to both analytical and personal perspectives in order to receive approval from Scott. Therefore any recommendation must include units available for the channel at the time of launch and a way to mine the technical staff for costsaving ideas. Scott’s vision is about monetary success for GPS-to-GO based on his ability, drive and leadership in going against well-established GPS giants like Garmin and Megallan. Thomas has to play to Scott’s ego and provide a thorough analysis of options to meet his end goal. Thomas has to manage the inevitable variation intrinsic to these options to enhance the probability of success. Risk mitigation activities must factor in cost and time to implement. Some include: design engineers on the production floor at the start-up of the U.S. factory; a tiger team of people to quickly go after cost reductions; an adequate safety stock of units to provide coverage for the transition to China or a redesign or both; and rapid feedback from channel partners to understand demand profile, customer problems, and competitive reaction such as price cuts. Students should state the importance of both revenue and earnings and why. Guidance to Question 2- Students should state the importance of both revenue and earnings and why. The very beginning of future projects, the target cost must be clearly defined and communicated to the entire team. It should be one of the key measures of success for the team and meeting the target should be rewarded accordingly. Moreover; operations has to be part of the project in the beginning to provide expertise in managing raw material selection for cost, quality and delivery. This can be taken one step further by involving some preferred suppliers early on to utilize their expertise and process knowledge to design portions of the product or make recommendations on GPS-to-GO’s designs. Studies show that 70 percent to 80 percent of product cost is dictated by the design, which means once a product is launched, the ability to reduce cost is very limited. Last, a comprehensive “lessons learned” process can be added to share project successes and failures with future teams at GPS-to-GO. Lessons learned could also be included as part of one of the gate reviews in order to make it more effective to improve future projects. 6 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I Faculty of Business Studies Fall Arab Open University 2016/2017 Harvard Style - References / bibliography How -to guide Note: It is a requirement that all students include a header/footer of the following information on every single page of the TMA: Name, ID, Course Code, TMA #, Tutor name, section, and semester. • • • • • You have to use the Times New Roman Font Size 12 (except for the cover page). Line spacing should be 1.5 All pages should be numbered Keep wide margins for your instructors' comments Align your text to the left. Don’t justify leaving spaces between words Harvard Style Referencing: • There are various ways of setting out references / bibliographies for an assignment. • “Harvard Style” is a generic term for any referencing style which uses in-text references such as (Smith, 1999), and a reference list at the end of the document organized by author name and year of publication. In this guide, we are using a “Harvard Style” which is based on the author-date system for books, articles and “non-books”. NOTE: When you write your list of references/bibliography, please keep in mind the following points: 7 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I • • • Your bibliography should identify an item (e.g. book, journal article, cassette tape, film, or internet site) in sufficient detail so that others may identify it and consult it. Your bibliography should appear at the end of your TMA with entries listed alphabetically. If you have used sources from the Internet, these should be listed in your bibliography. FOR A BOOK The details required in order are: 1. name/s of author/s, editor/s, compiler/s or the institution responsible 2. year of publication 3. title of publication and subtitle if any (all titles must be underlined or italicized) 4. series title and individual volume if any 5. edition, if other than first 6. publisher 7. place of publication 8. page number(s) if applicable • One author Berkman, RI 1994, Find it fast: how to uncover expert information on any subject, Perennial, New York. Harper • Two or more authors: Cengel, YA & Boles, MA 1994, Thermodynamics: an engineering approach, 2nd edn, McGraw Hill, London. Cheek, J, Doskatsch, I, Hill, P & Walsh, L 1995, Finding out: information literacy for the 21st century, MacMillan Education Australia, South Melbourne. • Editor(s) Pike, ER & Sarkar, S (eds) 1986, Frontiers in quantum optics, Adam Hilger, Bristol. Jackson, JA (ed.) 1997, Glossary of geology, 4th edn, American Geological Institute, Alexandria, Va. • Sponsored by institution, corporation or other organization Institution of Engineers, Australia 1994, Code of ethics, Institution of Engineers, Australia, Barton, A.C.T • Series Bhattacharjee, M 1998, Notes of infinite permutation groups, Lecture notes in mathematics no.1698, Springer, New York. • Edition 8 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I Zumdahl, SS 1997, Chemistry, 4th edn, Houghton Mifflin, Boston. • Chapter or part of a book to which a number of authors have contributed Bernstein, D 1995, ‘Transportation planning’, in WF Chen (ed.), The civil engineering handbook, CRC Press, Boca Raton. • No author or editor Kempe's engineer's year-book 1992, Morgan-Grampian, London. FOR AN ARTICLE The details required, in order, are: 1. name/s of author/s of the article 2. year of publication 3. title of article, in single quotation marks 4. title of periodical (underlined or italicised) 5. volume number 6. issue (or part) number 7. page number(s) • Journal article Huffman, LM 1996, ‘Processing whey protein for use as a food ingredient’, Food Technology, vol. 50, no. 2, pp. 49-52 • Newspaper article Simpson, L 1997, ‘Tasmania’s railway goes private‘, Australian Financial Review, 13 October, p. 10 FOR A NON- BOOK NON-BOOK The details required are the same as for a book, with the form of the item (eg video recording, tape, computer file, etc.) indicated after the year. Get the facts (and get them organized) 1990, video recording, Appleseed Productions, Williamstown, Vic FORM OF ITEM Dr Brain thinking games 1998, CD-ROM, Knowledge Adventure Inc., Torrance, California FOR WEB SITES AND OTHER ELECTRONIC SOURCES 􀂄 FOR WEB SITES AND OTHER ELECTRONIC SOURCES • This could include sources from full text compact disk products, electronic journals or other sources from the Internet. • The basic form of the citations follow the principles listed for print sources (see above) 1. name/s of author/s 2. date of publication Note: If you cannot establish the date of publication, use n.d. (no date). 9 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I 3. title of publication 4. edition, if other than first 5. type of medium, if necessary 6. date item viewed 7. name or site address on internet (if applicable) Weibel, S 1995, ‘Metadata: the foundations of resource description’, D-lib Magazine, viewed 7 January 1997, . ASTEC 1994, The networked nation, Australian Science, Technology and Engineering Council, Canberra, viewed 7 May 1997, • If no author is given, the title is used as the first element of a citation. Dr Brain thinking games 1998, CD-ROM, Knowledge Adventure Inc., Torrance, California REFERENCES IN THE TEXT OF YOUR ESSAY FERENCES IN THE TEXT OF YOUR ESSAY • In an author-date style, a textual citation generally requires only the name of the author(s) and the year of publication (and specific page(s) if necessary). • This may appear at the end of a sentence, before the full stop. Examples: It is futile to maintain that the sexes are interchangeable (Moir & Jessel 1991). It is futile to maintain that the sexes are interchangeable (Moir & Jessel 1991, p.94). • Alternatively, the author’s surname may be integrated into the text, followed by the year of publication in parentheses. Examples: Moir and Jessel (1991) have shown that it is futile to maintain that the sexes are interchangeable. Moir and Jessel (1991, pp. 93-4) have shown that it is futile to maintain that the sexes are interchangeable. • If two or more works by different authors are cited at the same time, separate them with a semicolon Example: The implications for land degradation have been much debated (Malinowski, Miller & Gupta 1995; Thomson 1999). • If two or more works by the same author are cited at the same time, do not repeat the author's name. Separate the years of publication by a comma • Alternatively, the author’s surname may be integrated into the text, followed by the year of publication in parentheses. Example: Subsequent investigation confirmed these results (Watson & Clark 1996, 1998). Public housing remains a neglected area (ACOSS 1997a, 1997b). 10 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I • If there are more than three authors, list only the first, followed by 'et al.' Example: Other researchers have questioned these findings (Larson et al. 1987). • If you cannot establish the year of publication, use 'n.d.' (no date). Example: Recent advances have been made in this area (Bolton n.d.). • If there is no author or authoring body, cite the work by title, in italics. Example: In military settings, leadership acquires a different significance (Be, know, do: leadership the Army way, 2004). 11 | B 716 I (MANAGEMENT: PERSPECTIVE AND PRACTICE) TMA02 Fall 2016-2017 Semester I w rP os t S 909A27 GPS-TO-GO TAKES ON GARMIN op yo Donald A. Pillittere wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2009, Ivey Management Services Version: (A) 2009-12-11 tC Joseph Thomas sat quietly in his office after a managerial whipping at the hands of his boss, Michael Scott. Thomas knew the cost meeting was going to be painful, but did not know it was going to be so severe. As the vice-president of operations for GPS-to-GO, it was his responsibility to drive the latest Global Positioning System (GPS) products towards their target cost. However, what the design had created was a Frankenstein monster full of overly expensive components and extensive modifications that required lengthy testing to ensure performance. No Thomas also wasn’t sure the design was truly done, meaning additional cost might be added prior to launch. The current cost was anywhere from 12 percent to 74 percent higher than the target based on volume and factory location (United States or China). Adding to the situation was Scott’s naïve fantasy that building the product offshore would somehow magically achieve the cost goal. Numbers don’t lie, and the cost reports from the initial production builds were the proverbial pig with lipstick — underneath, it’s still bacon. Do GPS-to-GO developed complex air traffic control and logistic GPS systems and company managers had decided that the time was right to move down market and provide units for the everyday man, woman and teenager. Thomas was part of a team that was getting ready to launch a new series of GPS products into the market, but at the current production cost, each sale would be upside down in terms of profit. Thomas’s other dilemma was that the Consumer Electronics Show (CES) for launching the products was just two short months away. Typical market sales by quarter for successful launches were 45 percent, 25 percent, 20 percent, and 10 percent. Even if Thomas had some cost reduction magic up his sleeve, time and the huge initial demand for units were not on his side. Though GPS-to-GO could command a premium for the abundant and unique features its systems would include, this was not going to compensate for the current unit manufacturing cost (UMC). On top of this, other competitors were well established and could profitably discount products, given their ability to build units offshore for significantly less money than GPS-to-GO. This advantage related to years of fine-tuning product design to leverage common components across multiple products, taking into consideration manufacturability and higher volumes due to demand. This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 rP os t Page 2 As Thomas continued to review the cost report, he kept coming back to a major redesign as the only way to meet the target UMC even though management would prefer to push to transition the product directly into the U.S. factory to have units ready in time for CES. He also knew management wasn’t going to change course for the project this close to launch and continue to burn $200,000 per month for a redesign that could take up to six months. As he locked his office for the night and headed home for a late dinner with his family, he came to the conclusion that design, marketing and operations were going to have to tackle this issue together. There was just no way Thomas felt comfortable digging into the product for ways to reduce cost without bringing the engineers that caused the problems in the first place along for the bumpy ride. op yo GLOBAL GPS GPS-to-GO was a subsidiary of Global GPS, a company with a great heritage of developing state-of-the-art GPS systems, mostly for government and retail applications. Management at GPS-to-GO, especially Scott, reasoned that GPS-to-GO could also dominate the consumer market. With a huge portfolio of patents from parent Global GPS, GPS-to-GO could easily out-feature the competition; the challenge was doing so against well-established competitors at a profit. In the past, most contracts were cost plus, so any cost overruns were paid for by the government or major retail customers. In addition, the idea of a target cost for building some of these complicated systems was an issue —with lives at stake in terms of air traffic control the government just wanted a working GPS system, period! For the major retailers with billions of dollars in inventory to manage across thousands of stores, accuracy of data and location was critical to maintaining their competitive advantage and low pricing. No tC Scott was a driven corporate climber who was named CEO of GPS-to-GO in the beginning of 2009 and wanted to establish himself in an even loftier position — CEO of Global GPS. As a former Silicon Valley engineer, he liked nothing better than being part of a company that could develop the next best techno-toy. With Global’s massive intellectual property (IP) inventory, Scott was the kid in the proverbial IP candy store and he wanted to take on the likes of Garmin and TomTom with this arsenal. GPS-to-GO had been a struggling subsidiary with no clear strategic direction until Scott showed up and quickly planned a future of dominance in the consumer GPS market. This strategy coupled with financial backing from Global GPS provided the necessary ingredients to help move GPS-to-GO to the next echelon. GPS MARKET Do Based on the various market research reports available to GPS-to-GO, the compound annual growth rate (CAGR) for GPSs was expected to grow at anywhere from 20 percent to 24 percent in the United States through 2013 for usage in automotive and consumer applications. Total U.S. revenue in this timeframe was forecasted between $9.2 billion and $10.3 billion by 2013. Market leaders included Garmin, TomTom and Megallan, with Garmin well ahead of others in market share. The one unknown for 2013 was going to be the mix in terms of standalone car-mounted devices, factory-installed units and GPS-enabled cell phones. Suffice it to say that the consumer demand for positioning units was a rare bright spot in the economy. GPS-to-GO wanted to take advantage of this growing market and firmly believed that eventually the GPS would be a common consumer item throughout the world. GPS-to-GO wanted to carve out a small niche at first with one-of-a-kind features, then build brand awareness over time and eventually overtake Garmin at the top. Scott idolized Steve Jobs at Apple and wanted to eventually take consumer GPS units to the This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 rP os t Page 3 level achieved by the iPod. At least this was Scott’s vision. Scott’s reasoning for his lofty ambition was that Global GPS basically invented global positioning technology through its government contracts, and had the engineering expertise, patented technology and deep pockets to become the dominant player. PRODUCT DEVELOPMENT op yo Product development at GPS Global was littered with processes galore in order to manage government contracts and ultimately tax payer dollars. Owing to the “more is better” philosophy, processes and new procedures were constantly added as a way — at least that’s the thought — to make sure that Global GPS would be in a position to pass any and all government audits. Most of the time, new processes were added in response to problems, which delayed previous projects, which cost Global GPS bonus fees. No one wanted to review new processes to see if they duplicated others; it was just better to follow along and add more paper work to an already burdened system and staff. In fact, many joked that success at Global GPS went to the person with the largest volume of office paper. Development in terms of people followed the processes, with the division of labor in line with what Henry Ford instituted at Ford in the early 1900s. Project teams could easily comprise more than one hundred people from design, production, quality, supply chain and regulatory compliance. One reason for this was the complexity of product design; another was that many members were required based on the many processes and cross-checks instituted over the years. Even with many incredibly brilliant employees, nothing was ever done in a timely fashion, as individuals had to chase down multiple people in the organization to get to the one person who had authority or responsibility to perform a task. tC Another issue that hurt Global GPS was the urgency or lack thereof when performing project tasks. With some projects taking years to complete, schedule slips of days, weeks or even months tended to rarely push teams to compensate for lost time. The problem with this tendency was that when there were multiple schedule slips, the overall schedule could be pushed out by year(s), at which point it was too late to alleviate the situation. Trying to get this group to develop a consumer GPS in a fast-paced market scared Thomas; however, he was confident that eventually the company would create something far more advanced than competitors. The problem was the definition of “eventually.” No INTELLECTUAL PROPERTY Do Global GPS sat on a mountain of IP, thanks in large part to decades of developing government GPS systems. Even though some of the IP could never be commercialized as part of a consumer product, other IP had the potential to far surpass anything companies like Garmin, TomTom and Magellan could offer. One potential feature was voice command to access the various menus of the GPS to minimize the driver being distracted by fumbling through the menu by hand. Another was a patented feature (code-named TripSaver) that could find the most cost-effective route to travel, taking into account distance, gas prices, tolls and construction. One feature that was hotly debated internally was the ability to use your own voice to provide directions. The user was able to record their voice through a small microphone in the GPS unit and unique software/hardware then customized all recordings with the customer’s voice. On one side of the debate were some of the male engineers who feared that their wives and/or girlfriends would customize the system with their voice, which somehow went against the male gender’s distaste for asking for directions let alone having their significant other provide them. Others tried out the system and were surprised at how annoying their voices were after a very short time. On the positive side, some of the This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 rP os t Page 4 marketing staff thought the ability to customize a voice would play nicely with teenagers and twenty somethings that loved technology and tended to be more self-absorbed. Global GPS also had in its IP library the ability (code-named TripPoint) to track a person’s trip and post locations and Tweets about the trip through the GPS system. Again there were heated debates, with some concerned about the distraction of reading text messages while driving and others stating it was safer to read than talk or text via a cell phone. Plans were also in the works for adding cell phone and MP3 capability into the product line, of course all based on voice commands in addition to the touch screen. Accessory products to mount the GPS into a speaker system were in the product family plans as well. op yo Unfortunately no one wanted to test these concepts outside of Global for fear of the competition getting wind of them and attempting to beat Global to the market. Many in Global didn’t even share some of these ideas with their family or friends, given the way information could quickly spread through Facebook and other digital communication avenues. PRODUCTION Production at Global GPS was created over the years to build very complicated one-off systems for the government. Volume of any kind might be a handful of systems: one for use, another for backup and the third for a redundant backup or spare. Therefore operations was more of a job shop than any kind of fullblown production system with very skilled workers using technologically advanced equipment to assemble and test units. Failure of any kind out of the factory was unacceptable, so testing of the system consumed a large portion of labor. GPS-to-GO had no formal production facility so the choice was either leverage Global’s factory, create its own or find a contract manufacturer. No tC Thomas knew all too well of the problems he would face if the consumer product was built at Global; he was also aware of the cost and time necessary to build a production facility at GPS-to-GO. So early on he started to reach out to contract manufacturers (CMs) that could produce GPS units in volume. He wanted to partner with a CM that could transition the product from the United States to China after the production process was fine-tuned to take advantage of lower labor rates. In addition, the marketing manager thought it made sense, if GPS units took hold in China, to have a local presence to get around tariffs and duties. Needless to say, even with a head start in choosing a CM, Thomas was behind schedule on factory start-up due to delays in development. OFF-SITE MEETING Do One of the first things Scott did when he landed the job at GPS-to-GO was to schedule a week for an intensive off-site meeting. Each functional manager was expected to present the current state of the business, issues they were facing, and plans for addressing issues to better position GPS-to-GO. In advance, Scott had sent a handful of slides with his proposed product portfolio, which had his managers questioning his understanding of the difficulty of successfully designing and launching a consumer product, let alone a family of them. Many of these managers were from Global GPS and had never been part of an off-site meeting that didn’t include a government customer who basically dictated the what, when and how of a product that would take years to design and build, not months. Scott started the meeting with his thoughts about the future, constantly reminiscing about his days in Silicon Valley, where the impossible was always possible. With his $1,000 custom-made suit, perfectly This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 rP os t Page 5 pressed shirt, silk tie and Italian shoes, Scott was almost as impressive as he thought he was. He spoke with a confidence that was unheard of for someone new to the Global community since many people gained this level of respect only after many years at Global. And yet Scott in his first week addressed the managers as if he had been with Global his whole career. PRODUCT PORTFOLIO op yo As each manager presented, Scott pushed them to do more especially as it related to his vision for GPS-toGO. It didn’t take long for the management team to realize that they were going to have no choice, as GPS-to-GO under Scott’s leadership was going to launch a series of GPS units at the same time for consumers. Thomas had seen managers like Scott in the past and wanted to believe that Scott would be a man of his word. Thomas liked nothing better than an impossible challenge and Scott was presenting one during the off-site meeting. Thomas was the everyday manager who had grown up at Global and commanded great respect from his peers. During the meeting, Thomas listened to Scott and raised potential issues that could derail the project, even suggesting some risk mitigation activities, but each time Scott chose to ignore him. At the end of the off-site it was decided that the overall strategy needed some fleshing out and another meeting was set up for the following week. tC A week after the off-site, Scott, Thomas and Joan Dolce, the marketing manager, met to finalize the product portfolio and attendant features that Scott wanted to launch. His strategy included a me-too product with similar features to the competitors and with a small price tag; a middle-of-the-road with better features; and the premier version with unique features such as voice commands, TripSaver and the ability to use your own voice as the narrator. Dolce did her best to provide potential volume, selling price with channel discounts, channel partners and unit manufacturing cost (UMC). With Garmin’s market dominance and channel discounts, the overall market price and target UMC left little room for GPS-to-GO to maneuver. No Scott argued that, with GPS-to-GO’s premium features, teenagers and twentysomethings would spend the extra money, thus offsetting the need for UMCs on par with competitors. The flaw in this argument was that Dolce’s price elasticity calculations disagreed with Scott’s price target and even the best case volume would cause GPS-to-GO to lose money on each unit even if Scott was correct. The only way the overall business case would be positive was if there was a “perfect storm” of high demand, skyrocketing gas prices (a TripSaver driver) and a flawed price elasticity model. Both Thomas and Dolce doubted that this would happen, due to Garmin’s ability to undercut GPS-to-GO on pricing. At the end of a series of meetings and after much discussion, some heated, Scott, Thomas and Dolce agreed to what Scott ultimately wanted — the simultaneous launch of GPS-to-GO’s new portfolio: GO I GPS GO II GPS GO III GPS $100 to $249 segment $250 to $349 segment $350 to $499 segment Do • • • Each unit had comparable features to existing market leaders and included one or two more that Scott thought would be order winners for the end consumer. The GO I GPS was loaded with features that were years ahead of the competition, and the big question was whether the market was ready for these and their attendant premium. This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 LADIES AND GENTLEMEN — START YOUR ENGINES rP os t Page 6 Teams were quickly assembled within the ranks of GPS-to-GO to get working on the three product families. Even though some at GPS-to-GO, including Thomas, wanted to spend time on developing a common architecture across products to reduce costs, better enable service and minimize duplication of effort, Scott’s date had to be met, so little was done in this regard before pushing forward. In fact, Scott met with each team and gave them his great vision for the future and the role they played. Each team had the same assessment of Scott — that he gave great presentation! op yo Hard work was nothing new for these teams; however, a rigid end date was an anomaly. To help offset the culture at Global GPS that passed into GPS-to-GO, project leaders were chosen that had reputations for meeting critical delivery dates. Scott wanted to leave nothing to chance; failure was not going to be an option. To keep team engines running at peak efficiency or just running, Scott periodically attended meetings without warning and continued to push for launch readiness. In the frenzy to get something launched, engineers designed for features, not cost, even as members from Thomas’s team attempted to suggest ways to reduce cost while maintaining performance. No one on the project, especially the leaders, wanted to miss the end date dictated by Scott. tC The teams eventually set up a race between each other, with beer and chicken wings going to the winner, courtesy of the losing teams. This internal competition accelerated the project activities and within six months, working prototypes were being demonstrated to Scott. As crude as some of these units were, everyone, most importantly Scott, was pleased and gained more confidence in being ready for CES. After working prototypes, beta units came three months later with actual production enclosures and screens. Given the secrecy of the project, team members including design, marketing, service, quality and operations ended up being the beta testers. Each beta tester had to follow a formal process and write down their weekly experience and provide great detail on even the slightest problem. No Momentum was building and software bugs found by internal beta testers were fixed almost as fast as they were discovered. In parallel, features were added and tested and problems were fixed as the launch date rapidly approached. The problem with the focus on design was that the time needed to transition into production was consumed as more ideas for features were generated and implemented. Thomas constantly had to pester Scott to force the engineers to provide him with the required documentation to start preparing for the production build. UMC DEBACLE Do Thomas’s team had much to do in order to set up the material requirements planning (MRP) system to plan for the construction of the three GPS units. Many of the parts needed, such as circuit boards, enclosures and packaging, as well as the touch screens and adapter cables, were in the system. Thomas’s conversations with Scott freed up some of the last pieces of the bill of material (BOM) puzzle for just the GO I GPS, so a request for quote package could be completed. Purchasing put together final quote packages and sent them to five well-known contract manufacturers. Volume was based on the range provided from Dolce as part of a planning meeting that took place almost a year earlier. Thomas was anxious to receive quotes to understand whether tooling and labor cost were in line with his expectations. His other hope was that GPS-to-GO could leverage volume purchases of common electronic components by the CM to reduce the circuit board cost to match or beat the target cost. As quotes were received, dollar savings from common parts were minimal as it became apparent that recommendations This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 9B09A027 rP os t Page 7 from purchasing on less expensive components were mostly ignored. To add insult to injury, the complexity of the boards in terms of parts count just exacerbated the situation. Even across products there were few common parts, such as the display, that could help offset cost. op yo Even before loading the cost data into Excel, including parts, labor (United States and China) and fixed and variable costs, Thomas knew that the GO I GPS was well over the target cost. The finalized cost sheets (see Exhibits 1 and 2) showed that the most pressing cost drivers were the parts cost and the labor dollars required to perform product testing. For example, the actual parts cost for the GO I GPS product was 47 percent higher than the target at 100,000 units and 42 percent higher at 300,000 units. This was the case regardless of the manufacturing location. The labor cost (direct and test) for building the GO I GPS was more than double the target cost for the U.S. factory, and, at minimum, 43 percent less in China. Assembling the product in China enabled GPS-to-GO to better the labor targets, but this assumed that the support cost to get the factory running would not offset the savings. With quotes due for GO II GPS and GO III GPS within the next few weeks, Thomas knew that both would also fall short of their target cost. Do No tC Thomas decided to call a team meeting to figure out if anything could be done to drive down cost before he had to share the numbers with Scott. Thomas wished there was a way to improve the cost prior to his meeting with Scott later in the week, but understood that the reality of the situation was not going to change. Later, after golfing in a company league, Thomas shared some of the data with his friend Mark Smith from engineering. Smith’s opinion was that you could only get so much out of the current design, unless demand for these products was exponentially greater than forecasts, which was highly unlikely. Smith suggested going to market with the current design and rapidly redesigning in parallel to meet the target cost. Smith’s last words were “Good luck convincing Scott that this is the right thing to do.” This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Do 85.00 $ 249.99 25% $ 187.49 $ Retail Price Channel Discount Channel Price Margin Margin Percentage 56.49 30% Goal 14.00 10.00 12.00 $ 121.00 10.00 $ 131.00 $ $ Goal Margin Summary: Raw Materials Labor: Direct Test Variable Manufacturing Overhead Cost Total Variable Manufacturing Cost Fixed Manufacturing Overhead Cost Total Unit Manufacturing Cost (UMC) Manufacturing Cost Summary: Volume (goal 200,000 units) Exhibit 1 $ $ (40.01) -21% 187.49 Per Unit 30.00 25.00 27.50 $ 207.50 20.00 $ 227.50 125.00 122.50 $ (23.76) -13% 187.49 Per Unit $ 120.70 26.80 23.60 25.20 $ 196.30 6.67 $ 202.97 $ Per Unit 300,000 9B09A027 187.49 $ (15.48) -8% $ Per Unit rP os t 28.25 24.25 26.25 $ 201.25 10.00 $ 211.25 $ Per Unit 200,000 op yo $ Per Unit 100,000 $2,000,000 CONTRACT MANUFACTURER (UNITED STATES) tC No Total Fixed Manufacturing Overhead Cost Page 8 This document is authorized for educator review use only by Saher El Annan, HE OTHER until November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Do 85.00 $ 249.99 25% $ 187.49 $ Retail Price Channel Discount Channel Price Margin Margin Percentage 56.49 30% Goal 14.00 10.00 12.00 $ 121.00 10.00 $ 131.00 $ $ Goal Margin Summary: Raw Materials Labor: Direct Test Variable Manufacturing Overhead Cost Total Variable Manufacturing Cost Fixed Manufacturing Overhead Cost Total Unit Manufacturing Cost (UMC) Manufacturing Cost Summary: Volume (goal 200,000 units) Exhibit 2 $ $ 21.86 12% 187.49 Per Unit $ $ 7.50 6.25 6.88 145.63 20.00 165.63 125.00 $ $ $ $ $ 6.70 5.90 6.30 139.60 6.67 146.27 120.70 Per Unit 300,000 9B09A027 35.31 19% 187.49 $ $ 41.22 22% 187.49 Per Unit rP os t 7.06 6.06 6.56 142.18 10.00 152.18 122.50 Per Unit $ $ $ Per Unit 200,000 op yo $ Per Unit 100,000 $2,000,000 CONTRACT MANUFACTURER (CHINA) tC No Total Fixed Manufacturing Overhead Cost Page 9
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