My main discernible problem this week was that of my team performance in MikesBikes, this sounds like a major issue but for me this feels not as bad as some previous weeks as all the team members banded together and worked really hard. We took on lessons we have learned in the past and all actively contributed, which is progress from last week. However. The big however. Our Cost of Goods sold is just way too high for our retail price so that we can't make a profit, for me this boils down to quality and production issues (particularly as this is my department). To reiterate: main problem this week is our production costs being way too high.
High production costs is not always a problem but as we have high costs and perceived low quality, resulting in low prices- we have a problem. 'Low quality' in itself is not actually a problem, obviously many companies such as WalMart are highly successful in running a low cost approach as customers accept that a lower price means that a product will likely do less or be less aesthetic. The problem for us is that this wasn't our strategy aim and we were not prepared or aligned to go down the low cost road. We had agreed initially that high quality would be our differentiation and yet we couldn't produce this. For me this is due to our take on theory, such as Total Quality Management, just not being reflected at the end of each year. For example, we had really good internal quality which should mean we only need a lower percentage of inspections, in reality- we had a really low rework and internal failure rate but were still perceived as being really low quality.
We've had this low quality problem since early on so- why not just spend more on quality and fix it? We tried! We really put loads of money on it, brainstormed and tried loads of combinations but we still have the lowest quality. We tried accepting that and then spending more on marketing our products so that customers would hopefully forget the quality aspect. As our prices are generally in the lower end of the market, in real life this would likely influence a number of customers into believing we are low quality because we are low price- not too sure if this can happen in MikesBikes but either way, our starting strategy should have been raise prices as this in line with a high quality product.
To me, much of this analysis (as per Daudelin, 1996). is valuable in hindsight but how much could I genuinely have fixed in the past by making better decisions? I think not much, but all I can do is try to not make the same mistakes twice. So, what to do for next week?
1. Accept the inevitable and clear signals from the market that we are the low quality producer and adopt this- this would mean slashing our expenses such as marketing and merely producing as many as possible to sell for as low a cost as we can. However, our prices are already low and every market is fairly saturated so a huge influx of low cost products would likely not be successful...
2. Issue shares/ check under the couch for change and raise all the money we can for a major upheaval in strategy and maybe only produce one or two kinds of bike and hope we can recover some SHV.
Daudelin, M. W. (1996). Learning from experience through reflection. Organizational Dynamics, 24(3), 36--48