IB Business Management HL 6.1.2 Ansoff Matrix Questions

In 2002, RDM produced its last kerosene stove and now primarily manufactures healthcare devices. Jan began to introduce a highly automated manufacturing process in 2006 that was operational by 2009. For most orders, customers enter desired specifications for healthcare devices into a template on RDM’s web page. An engineer then reviews the specifications. Often, engineers will contact the customer if questions arise or the engineers have identified a way of improving the design. RDM has developed several minor adaptations to customers’ products that have made them cheaper to produce or more stable. Once the design is approved, they transmit the information to accounting and marketing, which together determine the price for the customer. A person in marketing then contacts the customer to confirm that they want to proceed with the order. For decades, RDM employed a large unionized labour force, mass produced stoves and sold its product to wholesalers. Because of globalization and fierce competition from Asian manufacturers, which had lower cost structures, in the early 2000s Jan determined that European manufacturers would have to lower costs. Automation, while requiring significant capital expenditures, lowers costs in the long run. In addition, digitized communication between robots allowed RDM to be responsive to customers’ requirements. As RDM improved its automation processes and integrated cloud computing, mobile devices, big data, artificial intelligence and three-dimensional (3D) printing, its ability to customize products improved dramatically regardless of the size of the order. This integration of technologies also meant that RDM was not restricted to manufacturing healthcare devices; it could easily retool to manufacture other products when opportunities arose. RDM’s relationship with stakeholders was profoundly changed by the move to automation. In the 1970s, RDM employed roughly 500 workers, making it the largest single employer in Lobjanec. In 2019, the business employs 117 people, only a small number of whom are involved in manufacturing. Further, most of those involved in manufacturing are not skilled manual labourers but highly trained engineers and computer experts who manage the automated process. Their attitudes, aspirations and motivations differ significantly from the workers who survived the Second World War and had worked under the Communist regime. With this reduction in, and transformation of, RDM’s labour force, the company no longer has the level of local influence that it formerly had. The move to automation also led to changes in the organization of RDM. Traditionally, the business had been hierarchical. Design changes in RDM’s products were infrequent and directed by the CEO. Now, design changes for the healthcare products come with almost every order. Teams composed of individuals from all business functions manage orders. Jan, who replaced his father as CEO in 2001, has a democratic leadership style, which is different to his father’s paternalistic style. Over many years, Jan painstakingly introduced many changes in practices at RDM to create an environment of innovation. When Kristián headed the company, the environment at RDM was orderly, even dull. Jan, however, is constantly seeking innovation in both RDM’s products and its processes. He fosters an atmosphere conducive to creativity, with heavy emphasis on teamwork, diversity, humour and fun. Most employees love this environment, even though it sometimes seems chaotic. The atmosphere has produced positive results. However, some employees have complained that there is insufficient guidance and the business sometimes lacks focus. RDM has always displayed a strong sense of corporate social responsibility (CSR). Today, RDM maintains a full programme of CSR, including sourcing components from businesses who also have good CSR practices, paying fair wages and having a strong emphasis on care for the environment. A component of the cost to customers is delivery costs, which are based primarily upon weight and distance to delivery location. Given the cost of delivery, RDM can generally offer competitive pricing in a 700-kilometre radius of Lobjanec. This 700-kilometre range means RDM can be price competitive in crucially important Germany but less so in such potentially lucrative markets as Scandinavia, the Netherlands, Belgium, France and northern Italy. To continue to grow and access these potentially lucrative markets, the chief financial officer has proposed that RDM build an additional production facility elsewhere in Europe, which would extend RDM’s market area. Given that the entire order/manufacture/delivery process could still be performed in Lobjanec, this new facility would require limited staff and most of the work will be done by robots. Before considering the expansion proposal, Jan knows that RDM’s marketing strategy must be addressed. RDM has no marketing strategy but rather a series of practices that have evolved since the Radeki de Dovnic family regained control of RDM in 1990. RDM has an outdated name, a weak brand identity, no relevant vision or mission statement and no written operations management strategy or human resources plan. The company makes good products at competitive prices and is responsive to customers’ needs. As a result, the company enjoys healthy profits for now.

5. Jan is considering two options for the long-term development of the business: market development and diversification. Option 1: Market development Although Jan, with his strong associations with the US, likes the idea of developing the US market, he has concerns about it. Over the last four years, the exchange rate has fluctuated between $€ 1=\$ 1.40$ and $€ 1=\$ 1.03$. There is some evidence that the US wants to discourage imports and prefers foreign businesses to invest directly in the US. Jan thinks there are other markets in and closer to Europe that could be developed more easily without significant changes to the distribution channels or the culture of the business. He has suggested the United Kingdom (UK) market as an alternative, which has a health service similar to those in other European countries. In most other respects the UK market is similar to other European markets. The main worry is that the UK market would be difficult to enter, as established suppliers are likely to be preferred by the health service and there may be financial constraints on the health service. Option 2: Diversification Jan is also considering a proposal by Heinrik Langer, a business analyst. Heinrik's idea is for diversification. He thinks that RDM should develop a service role. RDM's directors and workforce have all of the skills and experience needed to help other businesses convert from traditional production methods to automated robotic production processes. This service (known as a consultancy) would require recruitment of more engineers and computer specialists as well as highly skilled and experienced consultants. Heinrik's proposal is based on: - the likely low long-term growth prospects for RDM's healthcare products. Population trends in Europe due to the low birth rates (Table 1) will lead to an aging population in the short and medium term. However, in the long term there could be economic and demographic problems arising from the eventual decline in population that is predicted to occur when the birth rate is less than 2.1 - his view that every business should have a service role - possible financial pressures on European governments, potentially reducing healthcare spending - his data market research results on robots and robotics (Table 2). [Source: © International Baccalaureate Organization 2019] Growth in industrial sales of collaborative robots is expected to triple between 2015 and 2025. By 2020, 1.7 million new industrial robots will be installed worldwide. Industries affected by robotics include: - unmanned air, land and sea vehicles - health care - manufacturing. Worldwide spending on robots in 2019: \$135 billion. [Source: © International Baccalaureate Organization 2019] Nikita, RDM's director of corporate strategy, has asked both Jan and Xi to provide data on each option to help her construct a decision tree to present at the next board meeting. The decision tree below summarizes the issues involved in the decision. [Source: © International Baccalaureate Organization 2019] Using the case study and the additional information on pages 4 and 5, recommend whether RDM should choose Option 1 or Option 2.