Allentown Material Corporation :

The Electronic Product Division

 Introduction

 They are one of the leading manufacturers of speciality glass.

 They were the first company to establish an industrial research
laboratory.
 Their key functional areas are Marketing and Research &
Development.
 Company reports an average growth of 10% per year.
 EPD Outlook

 Highly competitive scenario for Allentown’s business leading to a

significant decline in their operating margins (after 1990).
 Clients in telecom, PC and consumer electronics (60% of Sales)
 Electronics Industry: Maturity to Decline Stage. Largely
commoditized.
 Key Success Factors: Product Reliability, Serviceability, Attractive
Industry pricing, Continuous Innovation to cover newer client
releases.
 Headed by Don Rogers. Sub-ordinates: Financial Controller, Sales,
Marketing, Product Dev and Manufacturing managers.
 Three plants- Georgia (Resistors), Virginia (Resistors), Barnett
(Capacitors).
 Suggestions
 Put price on products such that at least 40% margin is involved, so that
mutual feeling of trust is developed between Sales and Manufacturing
unit.
 Set “Realistic standards for Profitability” on new products that it is possible
to meet them in component business. Focus on continuous innovation
through “product extensions” to stay relevant in the market place.
 Focus on shorter lead times, better quality and service levels.
 Improve relationships between Sales and Manufacturing. Set up
information systems to ensure serviceability of orders.
 Improve relationships between Manufacturing and Marketing. Adapt to
newer recommendations. Understand high margins difficult to achieve in
components business.
 Work Product Dev and Marketing teams closely to join provide specs for
new products.
 Suggestions (Continued…)

 Forming cross-functional teams and conducting team activities

would help in increasing the required trust and in building healthy
relations. Therefore, this would help in improving communication
and co-ordination among the teams.
 Sales team should be highly incentivized and this can be done by
having a salary structure that includes more of variable payment
(Sales-Commission). Focus on Value rather than Volumes.
 Define KPIs and address challenges faced by various functions.
 Problems of EPD
 Lack of Growth. Volumes Shrunk. High competition. Price erosion. Lowest gross margins.
 Inter-Departmental conflicts. Sales, Manufacturing, Marketing and New Product Dev.
Largely independent operations. Pursuit of self-interest rather than organizational goals.
a. Blamed Marketing for “Lack of strong leadership”, “Poor forecasts”.
b. Sales for “Focus on Volume not GPMs”.
c. Manufacturing (Hopewell Plant) for “poor service”.
d. Product Dev “Inefficient use of existing lines”, “Late Projects”,
 Low Morale and risk taking capacity, lack of communication and co-ordination across
departments.
 Too much pressure on Marketing (Forecasts, Segmentation, New Product Dev Plan,
Manufacturing)
 Departmental Slippage in goals unaddressed.
 Lack of strategic short and long –term goals.
1) What do you think has went wrong with Allentown Materials Corp – the EPD division?
2) What will be your recommendation?