Operations

Strategy
Le Petit Chef
By Group 9
Nishant Dey Purkayastha

PGP/18/153

Anurag Behera

PGP/18/236

Gurmeet Singh

PGP/18/243

Aniruddha Ghosh

PGP/18/284

Priyank Goel

PGP/18/315

(1) What should Gagn do? Specifically, which products should she fund and why? How
should she handle the executive meeting?
The strategy should be decided and tactics set as per the founders vision of the company, build
microwave ovens that would take the art of French microwave cooking to new levels. In the
short term, the company needs to survive and hence a low-cost low-end product proposed by the
marketing department will be considered. The inputs from some of the ongoing R&D projects
can be incorporated to set some features apart. For the long term, the R&D will need to focus on
the differentiating features of the products like the implementation of fuzzy logic, and the
implementation of more powerful magnetron developed by supplier. The following projects
should be funded
For short term:
1) Fund project for Cost reduction of the Eglite to develop a low-cost low-end Fratnite line
The reasons are
a. This has the highest NPV among all proposed projects
b. This project has been proposed by the marketing department, who are closer to the
consumers and have a better feel of the pulse of the market
2) Fund the develop of Develop a Liberte-express quick heating model by upgrading to a new,
more powerful magnetron
a. It will be easy to develop and add the differentiating feature to the product
b. Resource required is lowest and NPV is quite high too
For long term:
1) Fund New intelligent line of microwave cooking appliances with multiple sensors, and
controls with fuzzy logic intelligence
The reasons are:
a. The goal is to provide a total differential feature to the microwave oven to the customer
that would promote the sale.
b. Such models had been introduces in Asian markets with notable success and hence this is
where the market was moving to. Hence, acquiring the capability is necessary to stay
competitive in the future.
Gagne should put forward the facts that explain the poor performance of the company. She
should then explain the strategy to get the company back on track. Rational for selecting the
projects to fund should be clearly explained
To further give weight to her stance, financial projections for the next 3-5 years should be
prepared to show how the projects and their NPVs work out to get the firms financial health
back.

(2) What factors explain LPC's poor performance? What actions would you recommend to
remedy the situation?

The main reason was the increasing competitive pressure. When the Asian manufactures
expanded their low-end microwave ovens into European markets, they took away some profit
margins which forced some large European companies like Electrolux and Bosch-Siemens to
move into up-market that in turn pushed down Le Petit Chefs profit margin. To counter these
competitive pressures that Le Petit Chef spent much more than needed in advertising and
promotion that cut into companys performance. Because of the competition, the price of
microwave oven also dropped by 10% each year from 1996 to 2000 that further reduced the
companys revenue. Another reason was the over extend their capabilities in the introduction of
new products. With very limited R&D resources, Le Petit Chef had expanded its products from
around 7 in 1995 to almost 30 different products in 1999. There were 7 ongoing projects in the
pipeline and 5 proposed R&D projects.
With the company size of 600, it could not compete with other big companies like the Japanese,
Korean companies for low-end, low-cost product and hence needed to speed up the development
of niche products that can differentiate their high-end higher margin product to attract customers.
The following steps may be considered to remedy the situation:
1) Focus primarily on high end market in the long run to narrow the scope of R&D research
2) Develop the features that differentiate among other products Customers only look for price
and differentiate features in cooking appliances
3) With R&D scope narrowed, spend efforts to standardize features as well as components that
provide competitive advantage.
4) Redeploy and redistribute the work among R&D engineers, since the electronic design
determines a big portion of the cooking quality seen by customers besides the use of higher
power magnetrons, the next engineer hired will be a designer.
5) In the short term, develop a low cost model to generate quick returns and ensure survival