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