playboy, Caterpillar Inc., Falcone

Playboy entreprises

In november 1988, after six years as president, Christie Hefner took over as CEO of the playboy empire her father had founded nearly 35 years earlier. Hugh Hefner’s playboy magazine grew and prospered by promoting a life-style of guiltless sex and fast living. It became a staple of U.S. pop culturein the 1960s. but times changed. Unfortunately for playboy Entreprises, the company didn’t respond very well to those changes.
The flagship’s business, its playboy magazine, suffered declining circulation throughout the late 1970s, fell to 4,7 million in 1982, and was down to 3,4 million when Ms. Hefner took over as CEO in 1988. the magazine was suffering from attacks by feminists, increased competition from more sexually explicit magazines and X-rated home videos, and a shift toward more conservative sexual mores.
Other parts of playboy Entreprises wern’t fairing much better. The last of its bunny-hosted clubs in the United States closed in 1987. Its lucrative gambling casinos in London ; Atlantic City, and the bahamas were sold in the early 1980s.
The company’s pay-cable service, the playboy channel, was losing both subscribers and money. One og the few bright spots for the company was its licensing and merchandising business.
For fiscal 1988, Playboy’s earnings plunged 76 percent to $2,6 million on the flat sales of $159,8 million. Christie Hefner knew that she had a challenge ahead of her, but she was confident of her ability toi respond. Convinced that Playboy had to move beyond her father’s original vision of an empire built exclusively for men, Ms. Hefner planned on making Playboy into an international media and marketing company.
Questions :
1- describe Playboy Entreprises’ environment. What opportunities and threats are present ?
2- what are the company’s strengths and weaknesses ?
3- what corporate-level strategy do you think Christie Hefner should pursue ? why ?.

Caterpillar Inc.
Caterpillar’s business of building farm and construction equipment collapsed after the 1982 recession. Farmers had no money to buy new equipment, and the market for the comany’s highly profitable $500.000 monster tractors, which are used for earth moving, had dreid up with the decline in highway building.
Between 1982 an 1984, Caterpillar lost almost $1 billion. The company shut down old plants, slashed its payroll by 30 percent, and restructured its product lineup. Always known for its high standards of quality, Caterpillar’s management decided to focus on smaller machines such as farm tractors and backhoe loaders, but in this market it faced slim profit margins and fierce competition. In 1986, management decided that further drastic action was needed if Caterpillar was to remain the world leader in earth-moving equipment. Komatsu, its prime japanese competitor, already had a network of high-tech plants. To match and then exceed Komatsu’s production capabilities, Caterpillar’s management committed to a $1,8 billion plant modernization program.
Caterpillar dismantled its antiquated and costly production operation and installed a speedy, flexible manufacturing system. The company installed an electronic information network to link its thirty plants, its suppliers, and its dealers.
Plants were reworked to include the latest computer-integrated equipment. For instance, computers can adjust machine tools within seconds to meet the specs on any new order.
Results to date have been mixed. By 1989, the time it takes to fill orders for machinery parts had been slashed by as much as 60 percent at some plants, and companywide inventory levels had been cut in half. By early 1993, when the conversion is scheduled to be fully completed, Caterpillar’s management hopes to cut total manufacturing costs by 20 percent, or $1,5 billion a year. In the meantime, the conversion is well behind schedule and some $330 million over budget. The company earned record profits of $616 million in 1988, but earnings were flat in 1989. Wall Street was disappointed by these results, having expected continued increases in profit. Never very tolerant of long-term payoffs, Wall Street responded to the flat earnings by keeping Caterpillar’s stock significantly below stocks of other heavy-equipement manufacturers.
Questions :
1- describe how Caterpillar integrated its corporate and manufacturiong strategies.
2- Was Caterpillar taking a risky, long-term gamble ?
3- Management had other choices in 1986 besides spending nearly $2 billion to modernize its plants. What do you think these choices were ? do you think the choice it made was the correct one ? why or why not ?.

The Falcone Piano Co.

According to the old adage, build a better mousetrap and the world will beat a path to your door. Santi Flacone doesn’t buy it ! He’s built the « better mousetrap » and no one is knocking at his door.
The mousetrap, in this case, is a piano. Not just any piano, mind you, but a product that many believe is the finest in the world –one capable of going up against the likes of Steinway and Yokohama and beating them. But Santi Falcone is caught in a bind. Although he might make the world’s best piano, people won’t buy it until the world’s best pianists play it. However, the world’s best pianists won’t play it until more people buy it.
Falcone grew up loving pianos. By the time he decided to build the world’s best, in 1983, he had spent 25 years repairing, rebuilding, and selling pianos.
Using his life savings, he created the Falcone Piano Co. In a Boston suburb.
Today, he and his staff of sixty craftspeople slowly and carefully build three sizes of grand pianos. Each piano is virtually custon made for a narrow market that includes professional musicians, music schools, and others willing to pay between $18000 and $32000 for his product.
Falcone believes that he has the physical capabilities to produce between 850 and 1000 pianos a year. Were he able to reach this objective, he would gross $20 million annually and earn a profit of around $6 million. But his sales objective might not be attainable. Falcone’s firm is currently building and selling pianos at the rate of seven per month and losing money. The problem is that he competes in a declining industry, with two dominant U.S. players (Steinway and Baldwin) whose size allows them to offer service and availability that are beyond Falcone’s current resources.
Like basketball sneakers and tennis rackets, real industry status comes from big-name endorsements. In the concert piano industry, Steinway and Baldwin have signed the major artists’ to exclusive agreements. Artists agree to use pnly a specific brand of piano ; in return, the piano manufacturer can use the artists’ names and agrees to make a properly tuned piano available wherever and whenever the artists play. Such a relationship would be exceedingly difficult end expensive for Santi Falcone to duplicate.
To make matters worse, the number of pianos sold in the United States has declined by 40 percent since 1980. U.S. exports have dropped 80 percent. Imports, mostly Japanese and Korean, have more than doubled over the same period. A number of factors seem to be plaguing U.S. industry : a decline in quality, high labor costs, high prices of raw materials, a strong market for used pianos, and a decline in the number of children at peak piano-lesson ages.
Santi Falcone is perplexed. He knows that he has a quality product. Several famous pianists have told him his is the best. But any detrmination of « best » in the piano business is a subjective judgement. He already prices his product competitively with Baldwin and well below comparable Steinways and major foreign brands. Yet he is able to maintain his price advantage only because he bypasses independent piano dealers and sells directly to customers. Being a little guy, Falcone can’t much the kind of support system that Steinway offers its exclusive artists 126 dealers in more than 195 markets to ensure that pianos are available to its artists when they’re needed.
Questions :
1- describe Falcone’ environment. What opportunities and threats are present ?
2- what are the company’s strengths and weaknesses ?
3- what corporate-level strategy do you think the company should pursue ? why ?.