Question

The questions:

1. What type of technology Acme and Omega utilize to transform inputs into outputs?

2. Which strategic choice (differentiation or cost leadership) suits best to Acme? Omega? Do these companies have clear strategic choices or do they stuck in the middle?

3. Based on all the contingencies which type of structure is more suitable for these companies; mechanistic or organic?

please answer each question alone

The Paradoxical Twins: Acme and Omega Electronics John F. Veiga Part! boom of the early 1960s and both looked forward to growth and expansion. Acme had annual sales of sio In 1955, Technological Products of Erie, Pennsylvania was lion and employed 550 people. Omega had annual sales bought out by a Cleveland manufacturer. The Cleveland $8 million and employed 480 people. Acme was consiste firm had no interest in the electronics division of more effective than Omega and regularly achieved great Technological Products and subsequently sold to different net profits, much to the chagrin of Omega's management investors two plants that manufactured printed circuit boards. One of the plants, located in nearby Waterford, Pennsylvania, was renamed Acme Electronics, and the Inside Acme other plant, within the city limits of Erie, was renamed The president of Acme, John Tyler, credited his firm's Omega Electronics, Inc. Acme retained its original manage greater effectiveness to his managers' abilities to runa ment and upgraded its general manager to president. "tight ship." He explained that he had retained the Omega hired a new president, who had been a director of a basic structure developed by Technological Products large electronics research laboratory, and upgraded several because it was most efficient for high-volume manu- of the existing personnel within the plant. facture of printed circuits and their subsequent assem Acme and Omega often competed for the same contracts. bly. Tyler was confident that had the demand not been As subcontractors, both firms benefited from the electronics so great, its competitor would not have survived. "In fact," he said, "we have been able to beat Omega regu- This case was developed from material gathered from the two firms by larly for the most profitable contracts, thereby increas- Dr. John E. Veiga. All names and places have been disguised. ing our profits." Acme's basic organization structure is 428 Case Studies shown in Exhibit 1. People were generally satisfied with their work at Acme; however, some of the man- agers voiced the desire to have a little more latitude in their jobs. One manager characterized the president as a "one-man band." He said, "While I respect John's ability, there are times when I wish I had a little more information about what is going on." Inside Omega Omega's president, Jim Rawls, did not believe in orga- nization charts. He felt that his organization had departments similar to Acme's, but he thought the plant was small enough that things such as organiza- tion charts just put artificial barriers between special- ists who should be working together. Written memos were not allowed, since, as Jim expressed it, "the plant is small enough that if people want to communicate, they can just drop by and talk things over." Other members of Omega complained that too much time was wasted "filling in people who could not con- tribute to the problem solving. As the head of the mechanical engineering department expressed it, "Jim spends too much of his time and mine making sure everyone understands what we're doing and listening to suggestions." A newer member of the industrial engineering department said, "When I first got here, I wasn't sure what I was supposed to do. One day I worked with some mechanical engineers and the next day I helped the shipping department design some packing cartons. The first months on the job were hec- tic, but at least I got a real feel for what makes Omega tick." Most decisions of any significance were made by the management team at Omega. Part II In 1966, the integrated circuits began to cut deeply into the demand for printed circuit boards. The integrated circuits (ICS), or "chips," were the first step into micro- miniaturization in the electronics industry. Because the manufacturing process for ICs was a closely guarded secret, both Acme and Omega realized the potential threat to their futures and both began to seek new cus- tomers aggressively. In July 1966, one of the major photocopy manufacturers was looking for a subcon- tractor to assemble the memory unit for its new exper- imental copier. The projected contract for the job was estimated to be $5-$7 million in annual sales. Both Acme and Omega were geographically close to this manufacturer and both had submitted highly compet- itive bids for the production of 100 prototypes. Acme's bid was slightly lower than Omega's; however, both firms were asked to produce 100 units. The photocopy manufacturer told both firms that speed was critical because their president had boasted to other manufac- turers that they would have a finished copier available by Christmas. This boast, much to the designer's dis. may required pressure on all subcontractors to begin prototype production before final design of the copier was complete. This meant that Acme and Omega would have at most two weeks to produce the proto- types or delay the final copier production. Part III Inside Acme As soon as John Tyler was given the blueprints (Monday, July 11, 1966), he sent a memo to the purchasing department requesting them to move for ward on the purchase of all necessary materials. At the same time, he sent the blueprints to the drafting department and asked that they prepare manufactur ing prints. The industrial engineering department was told to begin methods design work for use by the pro duction department formen. Tyler also sent a memo to all department heads and executives indicating the critical time constraints of this job and how he expected everyone to perform as efficiently as they had in the past. On Wednesday, July 13, purchasing discovered that a particular component used in the memory unit could not be purchased or shipped for two weeks because the manufacturer had shut down for summer vacations. The head of purchasing was not overly concerned by this obstacle, because he knew that meya would face the same problem. He advised Tyler of this predicament, who in turn decided that Acme would build the memory unit except for the one component and then add that component in two weeks. Industrial engineering was told to build this constraint into their assembly methods. On Friday, July 15, industrial engineering notified Tyler that the missing component would substantially increase the assembly time if it was not available from the start of assembly. Mr. Tyler, anxious to get started, said that he would live with that problem and gave the signal to go forward on the assembly plans. Mechanical engineer ing received manufacturing prints on Tuesday, July 12, and evaluated their capabilities for making the chassis required for the memory unit. Because their procedure for prototypes was to get estimates from outside ven dors on all sheet metal work before they authorized in house personnel to do the job, the head of mechanical engineering sent a memo to the head of drafting requesting that vendor prints be drawn up on the chassis and that these prints then be forwarded to pur chasing, which would obtain vendor bids. On Friday, July 15, Mr. Tyler called the head of mechanical engi neering and asked for a progress report on the chas sis. He was advised that mechanical engineering was waiting for vendor estimates before they moved forward Mr. Tyler was shocked by the lack of progress and demanded that mechanical engineering begin build ing those "damn chassis." On Monday, July 18, Mr. Tyler received word from the shipping department that most of the components had arrived. The first chassis were sent to the head of production, who began immediately to set up an assembly area. On Tuesday, July 19, two methods engineers from indus- trial engineering went out to the production floor to set up the methods to be used in assembly. In his haste to get things going the production foreman ignored the normal procedure of contacting the methods engl neers and set up what he thought would be an efficient assembly process. The methods engineers were very upset to see assembly begin before they had a chance to do a proper layout. They told the foreman they had spent the entire weekend analyzing the motions needed and that his process was very inefficient and not well balanced. The methods engineers ordered that work be stopped until they could rearrange the assembly process. The production forman used to stop work. He said, "I have to have these units pro duced by Friday and already I'm behind schedule The methods engineers reported back to the head of industrial engineering, who immediately.com plained to the plant manager. The plant manager sided with the production foreman and said, "John Tyler wants these units by Friday. Don't bother me with methods details now. Once we get the prototypes out and go into full production, then your boys can do their thing." As the head of industrial engineering got off the phone with the plant manager, he turned to his subordinates and said, "If my boss doesn't think our output is needed, to hell with him! You follows must have other job to worry about forget this one." As the two methods engineers left the head industrial engi neer's office, one of them said to the other, "Just wait until they try to install those missing components Without our methods, they'll have to tear down the units almost completely On Thursday, July 21, the final units were being assembled, although the process was delayed several times as production waited for chassis from mechani cal engineering to be completed. On Friday, July 22 the last units were finished while John Tyler paced around the plant. Late that afternoon, Tyler received a phone call from the head designer of the photocopier manufacturer, who told Tyler that he had received a call on Wednesday from Jim Rawis of Omega He explained that Rawis's boys had found an error in the design of the connector cable and had taken care tive action on their prototypes. He told Tyler that he checked out the design error and that Omega was right. Tyler, a bit overwhelmed by this information told the designer that he had all of the memory units ready for shipment and that as soon as they received the missing component, on Monday or Tuesday, they would be able to deliver the final units. The designer explained that the design error would be rectified in a new blueprint he was sending over by messenger and that he would hold Acme to the delivery date on Turslar When the blueprint arrived, Tyler called the pro duction foreman in to assess the damages. The alter ations in the design would call for total disassembly and the unsoldering of several connections. Tyler told the foreman to put extra people on the alterations first thing on Monday morning and to try to finish the job by Tuesday. Late Tuesday afternoon the alterations were finished and the missing components were deliv ered. Wednesday morning, the production foreman discovered that the units would have to be tom apart again to install the missing components. When John Tyler was told this, he "hit the roof." He called indus- trial engineering and asked if they could help out. The head of industrial engineering told Tyler that his peo- ple would study the situation and get back to him first thing in the morning. Tyler decided to wait for their study because he was concerned that tearing apart the units again could weaken several of the soldered con- tacts and increase their potential rejection. Thursday, after several heated debates between the production foreman and the methods engineers, John Tyler settled the argument by ordering that all units be taken apart again and the missing component installed. He told shipping to prepare cartons for delivery on Friday afternoon. On Friday, July 29, 50 prototypes were shipped from Acme without final inspection John Tyler was concerned about his firm's reputation, so he waived the final inspection after he personally tested one unit and found it operational. On Tuesday, August 2, Acme shipped the last 50 units. that his people would begin production even though it might cost more. On Friday, July 15, at a progress report session, industrial engineering reported that the missing component would increase the assembly time substantially. The head of electrical engineering offered to have one of his engineers examine the missing com- ponent specifications and said he was confident that the Japanese component would work. At the end of the meeting, purchasing was told to order the Japanese components. On Monday, July 18, a methods engineer and the production foreman formulated the assembly plans, and production was set to begin on Tuesday morning On Monday afternoon, people from mechanical engi- neering, electrical engineering, production, and indus- trial engineering got together to produce a prototype just to ensure that there would be no snags in produc- tion. While they were building the unit, they discov- ered an error in the connector cable design. All of the engineers agreed, after checking and rechecking the blueprints, that the cable was erroneously designed People from mechanical engineering and electrical engineering spent Monday night redesigning the cable and on Tuesday morning, the drafting department finalized the changes in the manufacturing prints. On Tuesday morning, Jim Rawls was a bit apprehensive about the design changes and decided to get formal approval. Rawls received word on Wednesday from the head designer of the photocopier firm that he could proceed with the design changes as discussed on the phone. On Friday, July 22, the final units were inspected by quality control and were then shipped. Inside Omega Jim Rawls called a meeting on Friday, July 8, that included department heads to tell them about the potential contract they were to receive. He told them that as soon as he received the blueprints, work could begin. On Monday, July 11, the prints arrived and again the department heads met to discuss the project At the end of the meeting, drafting had agreed to pre- pare manufacturing prints while industrial engineer ing and production would begin methods design. On Wednesday, July 13, at a progress report session, pur- chasing indicated a particular component would not be available for two weeks, when the manufacturer reopened from summer vacation shutdown. The head of electrical engineering suggested using a possible substitute component, which was made in Japan, con- taining all of the necessary characteristics. The head of industrial engineering promised to have the methods engineers study the assembly methods to see if the unit could be produced in such a way that the missing component could be installed last. The head of mechanical engineering raised the concern that the chassis would be an obstacle if they waited for vendor estimates and he advised the group Part IV: Retrospect Ten of Acme's final memory units were ultimately defective, while all of Omega's units passed the photo- copier firm's tests. The photocopier firm was disap- pointed with Acme's delivery delay and incurred fur- ther delays in repairing the defective Acme units. However, rather than give the entire contract to one firm, the final contract was split between Acme and Omega, with two directives added: (1) Maintain zero defects and (2) reduce final cost. In 1967, through extensive cost-cutting efforts, Acme reduced its unit cost by 20 percent and was ultimately awarded the total contract.

Answer 1

1. Mr. John, Chairman of Acme, issued a letter to the Department of Purchasing, the Department of Drafting, the Department of Industrial Engineering and all heads and executives suggesting time limits.

The purchase department notes an item can not be purchased for the next 2 weeks. Acme agreed to build the prototype except for the one component, and then install the component.

The standard practice of calling the procedures engineers and setting up an assembly line and starting assembly was skipped in a hurry to get things going production foreman.

System engineers protested to head industrial engineer who reported to the plant manager immediately. The plaint was dismissed by the factory manager.

Later, a structural flaw was found and Acme was ordered to rectify the issue by photocopier production. The modification of architecture contributes to many links being disassembled and unsoldered.

Missing parts were mounted by disassembling again after design failure was rectified. This increased processing time and uninspected final prototype were shipped.

Omega on the other hand:

A conference was held with all department heads, the issue's criticality was clarified, and department heads decided to initiate the process at the top.

The purchase department notes an item can not be purchased for the next 2 weeks. Chief of engineer recommended replacement. The Head of mechanical division reported that the time and expense of assembly of the parts would rise in the absence.

The electrical division tested the specification and came up with a replacement.

They found the flaw in the specification when designing the machine, Flaw was corrected and the photocopier production company accepted improvements.

Before the deadline, they built the prototype and after testing the final version was shipped out.

2. Acme has seen delays in delivery. Acme has declared 10/100 units faulty. The prototypes of Omega has been passed. The actual deal had been split between both the two businesses. Acme reduced the cost of the project by 20 percent and was awarded the overall order. So, cost leadership better suits Acme. On the other hand, differentiation suits Omega better as they had lower defect rates.  No, both the companies have no clear strategic choices as both of them have weaknesses. they were stuck in the middle.

3. Acme has a clearly defined hierarchical structure but was unidirectional in the flow of knowledge. There was no prior communication between the administrators and the technical experts. As one of the staff said, "I wish I had a bit more details about what's happening." At the administrative stage, interdepartmental coordination was necessary only. So, mechanistic organization structure better suits Acme.

In Omega's case, it's president came from a research laboratory and valued everyone's advice. It was not clear what the corporate structure and task distribution were. Departmental coordination was good, when the purchasing department raised concern about a lag in a specific component there was an immediate response from the electrical replacement department and the mechanical department said that without this particular product cost and assembly time would increase. Data flowed in all directions without chairperson routing it. It allowed the manufacture of Omega at the time. So, organic organization structure better suits Omega.

As we know Acme was more successful than Omega in the long run. That may be because there was no simple distribution of workers. In comparison, information flow in Omega was stronger but often such information flow causes hindrance by causing conflict in the realm of one another.