Question

Fletcher‐Terry: On The Cutting Edge The Fletcher‐Terry Company of Farmington, Connecticut, is a worldwide leader in the development of glass‐cutting tools and accessories for professional glaziers, glass manufacturers, glass artisans, and professional framers. The company can trace its roots back to 1868 when a young engineer, Samuel Monce, developed and patented a hardened steel tool that could effectively replace expensive diamonds as a cutting device. Using this invention as his centerpiece, Monce formed the Monce Company, which went on to become a leader in glass‐cutting devices for several decades. Meanwhile, in 1894, Monce's nephew Fred Fletcher got a patent on a replaceable‐wheel cutter. Ten years later he went into business with his father‐in‐law, Franklin Terry, forming the Fletcher‐Terry Company. In 1935, the Fletcher‐Terry Company bought the Monce Company, thereby combining the assets and knowledge of the two companies. For the next four decades, Fletcher‐Terry had much success making its traditional product lines of hand‐ held glass cutters and cutting wheels for the glass, glazing, and hardware markets. However, by the 1980s, Fletcher‐Terry was facing a crisis. Its two largest customers, distributors of cutting devices, decided to introduce their own private‐label cutters made overseas. By the end of 1982, Fletcher‐Terry's sales of hand‐held glass cutters were down 45%. Fletcher‐Terry responded by investing heavily in technology with the hope that automation would cut costs; however, the technology never worked. The company then decided to expand its line of offerings by creating private lines through imports, but the dollar weakened and any price advantage was lost. Eventually, Fletcher‐Terry had to write off this line with a substantial loss. Company managers realized that if they did not change the way they did business, the company would not survive. They began a significant strategic planning process in which they set objectives and redefined the mission of the company. Among the new objectives were to increase market share where the company was already strong, penetrate new markets with new products, provide technological expertise for product development, promote greater employee involvement and growth, and achieve a sales growth rate twice that of the gross domestic product. To accomplish these objectives, the company invested in plant and process improvements that reduced costs and improved quality. Markets were researched for both old and new products and marketing efforts were launched to reestablish the company's products as being “the first choice of professionals.” A participatory management system was implemented that encouraged risk taking and creativity among employees. Following these initiatives, sales growth totaled 82.5% from 1987 and 1993. Fletcher‐Terry expanded its offerings with bevel mat cutters, new fastener tools, and a variety of hand tools essential to professional picture framers, and graduated from being a manufacturer of relatively simple hand tools to being a manufacturer of mechanically complex equipment and tools. Today, Fletcher‐Terry maintains a leadership position in its industry through dedicated employees who are constantly exploring new ideas to help Page 2 of 2 customers become more productive. Because of its continuous pursuit of quality, the company earned the Ford Q‐101 Quality Supplier Award. In August of 2001, Fletcher‐Terry introduced its FramerSolutions.com online business‐to‐business custom mat cutting service especially designed for professional picture framers. Fletcher‐Terry holds over 90 patents, including the “original” glass cutting wheel, the first vertical glass cutting machine, and the “wide‐track” all‐carbide cutting wheel. The mission of Fletcher‐Terry is to develop innovative tools and equipment for the markets they serve worldwide and make customer satisfaction their number one priority. Today, they have a distribution network to 60 countries worldwide.

Discussion

1. Fletcher‐Terry managers have been involved in many decisions over the years. Of particular importance were the decisions made in the 1980s when the company was struggling to survive. Several states of nature took place in the late 1970s and 1980s over which managers had little or no control. Suppose the Fletcher‐Terry management team wants to reflect on their decisions and the events that surrounded them, and they ask you to make a brief report summarizing the situation. Delineate at least five decisions that Fletcher‐Terry probably had to make during that troublesome time. Using your knowledge of the economic situation both in the United States and in the rest of the world in addition to information given in the case, present at least four states of nature during that time that had significant influence on the outcomes of the managers' decisions.

2. At one point, Fletcher‐Terry decided to import its own private line of cutters. Suppose that before taking such action, the managers had the following information available. Construct a decision table and a decision tree by using this information. Explain any conclusions reached. Suppose the decision for managers was to import or not import. If they imported, they had to worry about the purchasing value of the dollar overseas. If the value of the dollar went up, the company could profit $350,000. If the dollar maintained its present position, the company would still profit by $275,000. However, if the value of the dollar decreased, the company would be worse off with an additional loss of $555,000. One business economic source reported that there was a 25% chance that the dollar would increase in value overseas, a 35% chance that it would remain constant, and a 40% chance that it would lose value overseas. If the company decided not to import its own private label, it would have a $22,700 loss no matter what the value of the dollar was overseas. Explain the possible outcomes of this analysis to the management team in terms of EMV, risk aversion, and risk taking. Bring common sense into the process and give your recommendations on what the company should do given the analysis. Keep in mind the company's situation and the fact that it had not yet tried any solution. Explain to company officials the expected value of perfect information for this decision. (Source: Adapted from “Fletcher‐Terry: On the Cutting Edge,” Real‐World Lessons for America's Small Businesses: Insights from the Blue-Chip Enterprise Initiative. Published by Nation's Business magazine on behalf of Connecticut Mutual Life Insurance Company and the U.S. Chamber of Commerce in association with The Blue-Chip Enterprise Initiative, 1994.

Answer 1

SOLUTION :-

  

1. SUMMARY

A young engineer, Samuel Monce, developed a hardened steel tool for cutting glass. Meanwhile, Monce's nephew, Fred Fletcher, got a patent on a replaceable wheel-cutter. After 10 years, with his father-in-law, Franklin Terry, established a company called Fletcher-Terry. This was one of the leading companies in glass-cutting tools. The company bought Monce's company with combining assets and knowledge of 2 companies. In the coming 4 decades, the company was in blooming but in 1980, Fletcher faced a crisis. The company's large distributors started to produce their own private-label cutters made overseas. This reduced the business by 45%. Terry' manager thought the company could not survive.

Then Fetcher started a new company expanding to new Bebel Mat cutters and other similar products. Sales growth increased very soon. The dedication of the company got Ford Q-101, a quality supplier award in August 2001. Today, they have a distribution network to 60 countries worldwide.

FIVE DECISIONS

a) Understand everyone's interest.

b) Gathering relevant information.

c) Study various plans of competitors and other similar projects to understand our strengths and weaknesses.

d) The company must collect all its resources and converse with the employees with honesty.

e) Trust yourself and review your decisions regularly. Look for improvements and not ignore past mistakes.

FOUR STATES

The matter will be look at the post phase after the setting up of the new company.

a) The wholesome of the company's performance depends on the right decisions of the managers.

b) If the decision making power of managers is strong, the company will automatically progress.

c) All the employees will be affected by any new projects or other major changes made by the company. The company must keep this in mind.

d) Meetings with employees should be organised regularly and the management should welcome any new initiatives or ideas of the employees.

CONCLUSIONS

We can see that there is an expected loss of $ 38,250. If the company decided not to import its own private label, it would have a $22,700 loss no matter what the value of the dollar was overseas. It is clear that the loss from importing their own label is higher than when they are not importing. It is prudent for the company not to import their own label.

RECOMMENDATIONS

a) Reduce expenses.

b) Try to negotiate better deals from suppliers.

c) Sale the assets that are no longer being used.

d) Increase the output and the productive capacity.

EXPECTED VALUE OF PERFECT DECISION

If the decision is value-based, the outcome will be good and enhance the work quality as well as product quality.

Togetherness and trust among the employees are the two main objectives to be achieved for betterment of the company.