the subject strategic management>………………………………………………….
Pathway Bellows’ Strategic Positioning
Pathway Bellows, a division of Dover Corporation, designed and manufactured metal industrial expansion joints (devices that allow pipes to expand or contract as they heat and cool in use). Many of the bellows-type expansion joints Pathways produced fit huge pipes (up to 30 feet in diameter) found in very harsh environments, such as chemical processing or steam generation plants. Pathways’ competitive strength lay in bellows design and fabrication, but over 20 years, various competitors developed comparable expertise. Competition came to rely more on price-cutting, and profit margins eroded. Pathway sought new ways to develop strengths relative to its competitors.
Pathway’s analysis uncovered customers’ needs for quicker replacement part delivery. When an expansion joint at a chemical or steam plant failed, it very often shut down the operation, and millions of dollars in plant and equipment would sit idle, waiting for a new expansion joint. Pathway reasoned (thought) that customers would pay a premium price in return for shorter downtimes. As Pathway’s delivery times were no better than it’s rivals, the management team focused on developing speed as a competitive strength. The plan focused on inventories, cycle-time reduction, and on-site services.
Historically, Pathway held very low inventories and considered their high inventory turnover ratios a measure of success. However, they learned that customers would happily pay huge premiums for simple replacement parts (up to 400%) if it meant a plant could come back on line (in full operation) sooner. Of course, such premiums would more than pay for the inventory-carrying cost (the cost of keeping parts in stock) of the needed part, so Pathway developed a policy of carrying the industry’s largest inventory of the most commonly needed replacement parts.
But many parts (especially larger parts) were custom made (to customers’ specifications) and consequently could not be held in inventory easily. Pathway had to completely rethink its design, fabrication, and delivery approaches to speed them up. Previously, each work order progressed through a series of departments as each completed its work in turn. Delays and bottlenecks often interrupted this sequence, and discoveries made late in the process often required that earlier steps be repeated. Pathway reengineered (redesigned) this work so that a call for new bellows came in to a cross-functional team that stayed with the order until it was filled (fully processed) and, thus, they no longer needed time-consuming “handoffs” (processing an order by one person or department after another). With this process change, Pathway was able to establish a competitive advantage in quick response to custom bellows fabrication (made to customers’ specifications).
What if the fastest way to get a customer’s plant (industrial unit) back on line (in full operation) was to repair a bellows, rather than replace it? Pathway had never considered repairing bellows because of its historical strength in selling them. However, with that strength now matched by rivals, Pathway thought that repairs might be a viable new source of revenues. Consequently, it began training employees to repair in the field. This required a combination of sound practical engineering skills and world-class welding and metal fabrication skills. The company was so successful in developing these organizational capabilities that it developed a totally different approach to replacing/repairing bellows. Its field service crews learned how to build new expansion joints, often even while a plant remained in operation. Pathway offered to have a crew anywhere in the world within 24 hours, and crews developed unique skills such as rebuilding fire-damaged bellows even as internal fires continued to burn. This unique set of production processes led to the creation of a new business unit, which established a strong competitive advantage over rivals and helped Pathway achieve record profit levels.
1. Discuss how the strategic position of Pathway Bellows evolved over time.
2. What are the resource strengths of Pathway Bellows and how does it dynamically manage them?
3. Describe the approach of Pathway Bellows in dealing with its external environment.
4. How sustainable is the Pathway Bellows competitive advantage? Explain.
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