Husky Injections Molding System Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Husky Injections Molding System Case Solution

Introduction

Husky has maintained an inevitable and a strong position in the market of plastics processing equipment. Husky is a Canadian company, which has specialized in the production of the injection moulding systems. The company charges a huge premium for its products, as the products are highly specialized and are based on high performance systems(Rivkin, 1999). Till 1995, the company had been growing and resulting in high sales, but suddenly in 1996, the company started losing its profitability, as different competitors entered the market and started offering their medical equipment at lower prices. The new entrants’ products were similar to that of Husky’s, which had an ultimate impact over Husky’s market share. Looking at the deteriorated financials; the Chief Executive Officer: Robert Schad was concerned regarding the company’s competitive position’s maintenance and defending its traditional markets.

Reason behind Husky’s Good Performance – Key Strengths & Weaknesses

Husky follows a product differentiation strategy, whereby it offers high quality products to the customers at a premium price. The company believed that the manufacturing of the company’s products requires high quality and attention to the details in the overall manufacturing system. The company was offering the best quality product, which became a source of sustainable competitive advantage to the company and enabled it to charge a premium price,leading it towards the generation of higher profitability as compared to its rivals. The period of 1990’s proved to be a successful period for Husky, during which it achieved a tremendous profitability and growth. The company’s sales had increased from $250 million in 1992 to $600 million in 1995. Moreover, the return on equity generated by the company amounted to a total of 40%.

Furthermore, the company enjoyed a high brand position in the minds of the customers. Husky’ products were perceived as a complete package by the customers, as result of which, the customers were willing to pay a premium price to buy the products being offered by the company. Husky also focused upon increasing its product reliability and services’ credibility, thereby creating a trustworthy relationship with its customers.

The portion of his success was contributed by the company’s focus on the usage of PET (Polyethylene terephthalate), a key raw material in the company’s products. Even though the company was charging hefty premium to its customers, but it still had a higher sales growth and profitability. The other reason which made it possible was Husky’s efficient production system, which helped the company in manufacturing its products sooner and in a cheaper technique as compared to other industry players. Conclusively, a high brand equity along with high quality products and cheap raw material costs enabled Husky to become highly competitiveand profitable in the market

However, the company, despite being extremely successful, was dependent heavily on outsourcing, as most of its raw materials were outsourced. In 1996, the price of resin sharply increased, which comprised of 58% of Husky’s PET costs. Although the high price affected all the industry players, but Husky being the large industry player, was heavily dependent on the outsourcing of its products. In addition to this, Husky’s systems and competitive advantage were not sustainable as the competitors were able to offer similar products in the market, at lower price, which ultimately grabbed those customers who had low price preferences. Husky had created a niche market but the entry barriers were not much effective, as the competitors moved in looking at the company’s profitability aspects and by deploying modern technology, which then started offering their products at lower prices.

Lastly, a major weakness which was becoming a threat to Husky was the economies of scale achieved by the industry competitors like Netstal, which had more specialized technology as compared to other peers, as it also used a premium price for its products. In addition, the other key competitor was Cincinnati Milacron, which had also achieved an economies of scale and had went for an internal expansion of its markets, thereby providing it product at comparatively lower prices.

Husky’s Strategy – Decision (Change or Expand)

Husky remains a large industry player in the market. The company has generated its competitive advantage by providing high quality products to its customers through deploying high quality resources and machinery into its production process. The company has created a premium brand perception in the consumers’ mind, and the company would not be able to lower the prices and switch the strategy to cost leadership or cost focused strategy. It is because the company does have the economies of scale just like the other industry players. The competitors are using modern machinery, which has generated an economies of scale, enabling the players to charge lower prices for their products.

However; Husky, being a premium priced brand, should not shift its strategy towards cost leadership, because its products are considered as having a comprehensive plan. In addition, the company’s products and services are considered to be reliable and credible by its customers. The company should rather expand its strategy by focusing on the niche market which prefers high quality products. The company should divert its sales focus toward the niche markets, whereby the customers prefer high quality and premium priced product. Reducing the product cost and shifting towards a cost leadership is not a viable option as the brand will lose its charm ofbeinga high quality product..............................

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