LE PETIT CHEF

Microwave Ovens

Arun Shan SPankaj Kesarwani

Paul josephPriyank Srivastava

Sowmiya VSowmya Borra

AGENDA

Case Facts

Core Issues

Factors for Poor Performance

Stage Gate Model – Product Selection & Development

Plan of Action

CASE FACTS

Microwave oven History

1940 - RADAR(Radio Detecting and Ranging) 1946 - Magnetron and Chocolate Bar 1947 - The first commercial product hit the market 1952 - First home microwave model at $1295

COST STRUCTURE OF A MICROWAVE OVEN AS A % OF TOTAL COST

Microwave Cost Structure

Raw Materials 65%

Direct Labor 10%

Indirect Labor 6%

General Overhead & Depreciation

11%

Logistics & Stock holding

5%

Development 3%

Total 100%

Module & Assembly CostsCavity 15%

Power Supply 25%

Microwave system(magnetron, wave-guide)

15%

Door 10%

Controls 10%

Final Assembly 10%

Other 15%

Total 100%

Cost of Grill, crisp& control 40%

RECENT DEVELOPMENTS

Advances in wave-guide and cavity design. “Combi-ovens” - A combination of microwave and other cooking modes

(steaming, browning and grilling) Accessories - Allows users to cook specific types of food with greater

consistency Intelligence - Fuzzy logic (new control technique)

WORLDWIDE SHIPMENT OF MICROWAVE APPLIANCES

1990 1991 1992 1993 1994 1995 1996 1997 1998 19990

5

10

15

20

25

30

35

23.120.5

25.3

19.522.5

25.128.2 27.3 27.7

31.7

LE PETIT CHEF Founded in 1989 by Laurent Laferriere

Product line includes Mixers, coffee machines, griller/toasters and

microwave ovens

Egalite & Liberte–High end segment micro ovens

Combi-ovens

Microwave ovens – 85% revenues

Largest Markets – France & Rest of Western Europe

Appliances sold in 12 European countries

EXISTING PIC

Back Ground

o The European Microwave oven has an average household penetration of 58% by

1999.

o The buyers also prefer higher end products.

Focus

o Microwave oven with convection and grilling elements.

o Need to focus on higher end market with good R&D support

GOALS/OBJECTIVES:

o To dominate in the area of French Microwave cooking

o Build a recognisable brand Identity.

o To diversify in to manufacturing other high counter top appliances.

PRODUCT MIX TURNOVER BY GEOGRAPHIC REGION

61%17%

15%

7%

Microwave ovens

Breakfast appliances

Mini ovens

Food prepara-tion

41%

35%

8%

8%8%

Western Europe

France

Eastern Europe

N&S America

Rest of the World

STRATEGY

Encouraged strong inter-functional coordination and cooperation

Operating structure – High conformance quality, reliable order deliveries

and low costs

Differentiated through (High investment in R&D)

- Technological Innovation

- Performance features

Direct relationship with the retailers

Launching new products

Extensive Advertising

PROJECT SELECTION

•Series of R&D led meetings with

•Marketing & sales to sense customer needs

•Lead Technical developers to identify new technical directions

•Manufacturing to scrutinize promising process enhancements

Opportunity Development

•R&D screens “ideas” into a no of viable projects and documents as formal development proposals

•Gathering inputs from Marketing, Sales and Manufacturing as needed

•Prepares pro-forma NPV worksheet

Opportunity Refinement

•Director of R&D selects the projects to be funded

•Taking into consideration the projected returns from the available resources

Opportunity Selection

PROJECT EVALUATION

A cross-functional working group was set up to project execution process

Individual projects were organized with clear leadership from the R&D

unit and included members of other units

Project plan include the NPV analysis, a project charter and the detailed

sequence of project activities for review by head of the departments

1990S MARKET DEVELOPMENT

Increased competition

Asian manufacturers

Decline in prices

CRISIS

Manufact-

uring

•Trade off b/w cost & quality

•Lack unit volumes for each product offering

•Increased manufacturing complexity

Marketing

•Delay in launch of new model

•Lack of visible product differentiation

•Increased expense impacting budget

R&D

•Limited resources & Large no. of projects

GAGNE’S DILEMMA

New intelligent line of oven featuring Fuzzy logic

306 people; 18 months; 7,000,000; extensive R&D

Cost reduction of Egalite to introduce a low cost, low end

Fraternite line

New original design of low cost, low end Fraternite line

Develop Liberte express quick heating model by upgrading to

powerful magnetron

Add larger cavity model to Liberte line

72 people; 12 months; 20,000,000; marketing

180 people; 18 months; 10,000,000; counter proposal from

R&D

24 people; 6 months; 15,500,000

30 people; 6 months; 14,400,000

CORE ISSUES

Steady decline in performance for past 5yrs despite high investments and

increased product lines

Drop in margins due declining prices of Microwave oven in the market

Missing revenue targets and cost control targets

Issues of allocating resources to R&D & financial constraints in moving

ahead with projects

The number of complaints regarding R&D – mainly on Delays

Internal complaints in R&D about Overwork

Asian & European manufacturers are matching up with quality and that

too at very low cost

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(e)0

2

4

6

8

10

12

14

16

Profit %

Profit %

FACTORS FOR POOR PERFORMANCE Increased competition leading to decline of price in turn affecting

company’s revenues

Annually 10% decline in prices from 1996-2000

Low end market dominated by Japanese players

European players( Electrolux, Bosch-Siemens moved up-market)

Lack of resources for full fledged competition

Higher operating costs, high investment in R&D that cannot be fed by

current profits

Inefficient utilization of resources

o 7 to 30 products from 95-99

o 5 proposed projects & 7 in pipeline

o Churning out 5 model upgrades every year

Stage Gate – Product Management Tool

Stage Gate

Preliminary AssessmentInitial Screen DefinitionSecond

Screen DevelopmentDecision on Business

Validation

Post Devlpmt Review

Commercialization

Pre-commercializatio

n Decision

SCREEN 1 - INITIAL SCREEN

Firm’s core business resources are aligning with concepts

Market Attractiveness is based on pricing – Reducing the price can help

sustain the market

Carrying forward all the projects is not feasible due to financial and human

resource constraints

The strategically aligned ideas are thoseo increasing the quality

o reducing the cost and

o those proposed by marketing team

STAGE 1 - PRELIMINARY ASSESSMENT

Key Users and Focus Groupso Voice of the Customer (VOC)

o Survey from actual work environment

o Quick concept test with potential users

Cost and Time to execute

All ongoing projects which are taking more than 6 months are kept in pool

for later analysis, based on company’s growth/ shrinkage

Aesthetic differentiation

Waveguide redesign

Long Lasting Grill

Voltage Fluctuation

Egalite Compact

Halogen lamp grilling - Egalite

One touch cooking

PROPOSED PROJECTS ONGOING PROJECTS

Innovative Liberte

Modified Egalite

Fraternite

• 5 engineers• 15.5 Million (FF)Powerful Magnetron

• 6 Engineers• 14.4 Million (FF)Larger Cavity

To meet improved cooking performance of the competitors

Larger cavity design in stack

Function keys from top to side – More space per footprint

Latest(From 2006) – Functions set in door and hence maximum cavity

Larger Cavity

SCREEN 2 – SECOND SCREEN

Sales Forceo Feedback from Sales and Services

o Feedback from Retailers

Customer Reactiono Wants Le Petit to have all features that competing brands have in common

STAGE 2 - DEFINITION

“Wishlist” to technologically and economically feasible solutionso Quality Function Deployment

Financial analysiso Ensure the previous sacks were justified

Adobe Acrobat Document

Innovative Liberte

Modified Egalite

Fraternite

Powerful Magnetron

Larger Cavity

• Feedback fro RetailersAesthetic differentiation

• Feedback from Test KitchenWaveguide redesign

• Sales and Service FeedbackLong Lasting Grill

• Sales and Service Feedback• 8 monthsVoltage Fluctuation

• Marketing team proposalEgalite Compact

• Proposal from R&DHalogen lamp grilling - Egalite

• Common in all competing brandsOne touch cooking

PROPOSED PROJECTS ONGOING PROJECTS

SCREEN 3 – DECISION ON BUSINESS CASE

Modified PIC

Product Protocol

Decision to spend heavily – Go/ Kill

Target Market Definition

o Premium segment with highly innovative product – Competitive advantage for Le

Petit

o Survival needs targeting Price Sensitive market

Product Concept

o Concept sheet for Innovative Liberte

o Concept of Modified Egalite

Positioning Strategyo Innovative Liberte - For premium segment, based on Quality

o Modified Egalite - Existing brand, no promotion required, targeted to lower segment

for sales volume (Aiming Profit margin)

Innovative Liberte

Modified Egalite

Fraternite

Powerful Magnetron

Larger Cavity

• Feedback fro RetailersAesthetic differentiation

• Feedback from Test KitchenWaveguide redesign

• Sales and Service FeedbackLong Lasting Grill

• Sales and Service Feedback• 8 monthsVoltage Fluctuation

• Marketing team proposalEgalite Compact

• Proposal from R&DHalogen lamp grilling - Egalite

• Common in all competing brandsOne touch cooking

PROPOSED PROJECTS ONGOING PROJECTS

CONCEPT SHEET(CUSTOMER PERSPECTIVE)

• Features

• Benefits

• Pricing

• Offering

• Varieties

• Availability

Modified PIC

Background

o Profit margin declining due to lowering price to compete the Japanese and

European players and R&D at standstill due to lot of projects and resource

limitations

Focus

o The specialised focus need to concentrate at the respective product

segment:

Liberte: Quality management along with competitive pricing.

Egalite: Flexible product to cater the middle and lower end market at cost effective

model to generate revenue for the R&D process.

• Goals and Objective

o To compete and sustain in the hyper competitive market.

o In short term the focus to be more on the cost part and bulk selling to

generate revenue.

o The positioning of the low end product should also do carefully so that it

may not tarnish the image of the company.

o In longer run, the company can work for their premium product in order

to enhance brand image and better profitability.• Guidelines

o The products are highly innovative and first to market.

o Reduce cost wherever possible without compromising much on quality.

PRODUCT PROTOCOL (LIBERTE)

Target Market - High End Quality concerned customers

Positioning - High Quality at competitive price.

Product Attributeso Artificial Intelligence (Fuzzy logic)

o Long lasting Grill material

o Multiple Sensors

o Quick Heating Model

Competitive Comparison

o Quality

Augmentation Dimension-

o Improve Aesthetic Differentiation

o Upgrade with electronic user interface

Timing

o Developed and Launched in 12 months

Market Requirement

o Cross Functional Team to integrate R&D and Marketing Team

o New promotional and Advertising Strategies.

Financial Requirement

o Artificial Intelligence and Sensors should not exceed 70lakhs(FF) with 20%

tolerance

o Quick Heating Model Should not exceed 155lakhs (FF) with 10% tolerance

Production Requirement

o Quality should be given utmost importance

o Efficient logistics and transportation to reduce cost(where ever possible) and avoid

delays

Corporate Strategies - Serve upper end market with supreme

quality product at competitive price through:

o Lower cost design

o Automated Manufacturing Facility

o Improvement in operation

o Global Component Sourcing

Key Potholes-

o Monetary and Human Resource are in crunch.

o Delay in major modification and up-gradation.

o Hypercompetitive market leads to fierce price war.

STAGE 3 – DEVELOPMENT

Testing, Marketing and Operational Dimensions

SCREEN 4 – POST-DEVELOPMENT REVIEW Development is reviewed and checked

Detailed marketing and operational plans

STAGE 4 – VALIDATION

Product, Production, Consumer Acceptance

User/ Field TrialsSCREEN 5 – PRE-COMMERCIALIZATION DECISION

Last stage where you can kill

Financial analysis

STAGE 5 – COMMERCIALIZATION

PLAN OF ACTION

1

•Short Term Goals

2

•More Sales Volume

3

•Increased Profit Margin

4

•Financial Support for R&D

5

•Long Term Goals

SHORT TERM GOALS

Time Period- Reduces from 12 months to 6 months.

Modify Egalite to low cost version.(Customer Satisfaction)

To target the lower segment.

To compete with the existing products in the same segment.

Consumer Acceptance

One touch cooking and expand recipe offerings(to compete with current

models)

LONG TERM

Time Period- Reduces from 18 months to 12-14 months.

Artificial Intelligence line of Liberte appliances with:

o Multiple Sensors.

o Fuzzy Logic Intelligence

o Larger Cavity Model

o Quick Heating Model with powerful Magnetron.

o Improved Aesthetic differentiation.

o Long lasting Grill Material.

POOLING OF RESOURCES

All the selected ongoing project are shortlisted on the basis of two parameters:

o Marginal Cost Incurred

o Remaining time of Completion

o Market response

Modified Egalite

o Resource Required- 72 person month (72/6=12).Therefore,12-6=6 more people are

required.

o Cost incurred- 2 Crores + 10%

o Additional Comments-Some human resource (R&D) can be liberated from by dropping

other projects

No Project Description Number of Months Reqd

Orginal NPV of Project (FF)

Comments

1 Improve external finish, Colors & contours to make them more aesthetically differentiated

5 16,000,000 Market feedback from retailers

3 Change grill element material in liberte to extend life.

3 7,000,000 Sales & Service feedback.

7 Redesign the Egalite user interface for faster user input (one touch cooking ) and expanded recipe offerings)

6 13,700,000 All major competing models have this

ONGOING MICROWAVE OVEN R&D PROJECTS

DECISION ON PROJECTS

PROPOSED MICROWAVE OVEN R&D PROJECTS

Project DescriptionResources Required(Person- Months) Modified TTC

No of Engineers NPV of Project Comments

Liberte Innovative Model 306 12(18) 26(9)

₹ 84,00,000.00

Extensive Technology Development

Modified Egalite 72 6(12) 12(6) ₹ 2,40,00,000.00 Proposal from Marketing

Liberte Express 24 6(6) 4(4) ₹ 1,55,00,000.00 More powerful Magnetron

Thank You