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Muller Lehmkuhl GmbH

Case Solution
PGXPM VI Term III By N.V.Deepak

Mueller- Lehmkuhl GmbH: 1-2 page analysis on how would you react to the changes in the fastener / attaching industry. What corrective steps should ML take to face the Japanese competitor?

Changes in the Fastener/Attaching Industry:


1.

Japanese entrant in the European market M/s Hiroto Industries, sold fasteners at price 20% less than that of Muller Lehmkuhl, with same quality products. ML offered fasteners which were compatible to assemble only with their attaching machines, but Hiroto Industries manufactured fasteners which are compatible even with Muller Lehmukuhls attaching machines.

2.

3. This compatibility and a better price range made the customers slowly drift towards Japanese manufacturers fasteners.
4.

Hence, this has also had became a better deal for the distributors, which later preferred Japanese make.

Corrective Lehmukuhl:

Steps/Solutions

for

Muller

1. ML was bundling the price of the attaching machines with their fasteners price, if this is unbundled the price of the fastener will eventually come down. 2. The price of the fasteners can be reduced by 20% without compromising with the quality of the products ML will still make a profit range of 38% 48% in its product range

Product Cost Estimate:


Sl.No . 1 2 3 4 5 Prong Prong (S) Tack (B) 0.14 1.45 0.27 2.8 0.66 6.84

Description Direct Labor Cost Corrected DLC DLS Correction Factor 16.7/1.610=10.37) Old Cost New Cost (Old Cost Corrected DLS)

S-Spring Ring 1.32 13.69 1.43 14.83

42.46 28.77

38.59 23.76

9.42 7.97

13.63 10.83

29.17 22.33

3. As ML had a very strong R & D, a fastener can be innovated which can be easily fitted without the help of any attaching machines. 4. The attaching machines can be upgraded by ML by making it compatible with the fasteners manufactured by various manufacturers in the market, thus a separate market for MLs attaching machines will be created.

5. Loyalty rewards can be given to its customers who are complying with loyalty norms, also a better purchasing price can be offered to these customers for a various range of orders.

Profit on Fastener Sales:


Sale of Fastener Total Production Cost Attaching Machine Production Cost Fastener production cost Sales & General Administration Total production Cost on Fastener Profit on fastener $96,000 $70,000 $16,700 $53,300 $20,600 $73,900 $22,100