Question

Regal Marine

By Jay Heizer and Barry Render

Regal Marine, one of the U.S.’s 10 largest power-boat manufacturer, achieves its mission—providing luxury performance boats to customers worldwide—using the strategy of differentiation. It differentiates its products through constant innovation, unique features, and high quality. Increasing sales at the Orlando, Florida, family owned firm suggest that the strategy is working.

            As a quality boat manufacturer, Regal Marine starts with continuous innovations, as reflected in computer-aided design (CAD), high-quality molds, and close tolerances that are controlled through both defect charts, and rigorous visual inspection. In house quality is not enough, however, because a product is only as good as the parts put into it. Regal has established close ties with a large number of its suppliers to ensure both flexibility and perfect parts. With the help of these suppliers, Regal can profitably produce a product line of 22 boasts, ranging from the$14,000 18-foot boat to the $500,000 42-foot Commodore yachts.

            “We build boats,” says VP Tim Kuck, “but we’ve really in the ‘fun’ business. Our competition includes not only 300 other boat, canoe, and yacht manufacturer in our $17 billion industry, but home theaters, the Internet, and all kinds of alternative family entertainment,” Fortunately for Regal, with the strong economy and the repeal of the boat luxury tax on its side, it has been paying down debt and increasing market share.

            Regal has also joined with scores of other independent boat makers in the American Boat Builders Association. Through economies of scale in procurement, Regal is able to navigate against billion-dollar competitor Brunswick, maker of the Sea Ray and Bayliner brands.

Global Company Profile and Background

           

Thirty years after its founding by potato farmer Paul Kuck, Regal Marine has become a powerful force on the water of the world. The world’s third largest boat manufacturer (by global sales), Regal exports to 30 countries including Russia and China. Almost one-third of its sales are overseas.

            Product design is critical in the highly competitive pleasure boat business: “We keep in touch with our customers and we respond to the marketplace,” says Kuck. “We’re introducing six new models this year alone. I’d say we’re definitely on the aggressive end of the spectrum.”

            With changing consumer tastes, compounded by material changes and ever-improving marine engineering, the design function is under constant pressure. Added to these pressures is the constant issue of cost competitiveness combined with the need to provide good value for customers.

            Consequently, Regal Marine is a frequent user of computer-aided design (CAD). New designs come to life via Regal’s three-dimension CAD system borrowed from automotive technology. Regal’s naval architects’ goal is to continue to reduce the time from concept to prototype to production. The sophisticated CAD system not only has reduced development time but also has reduced product problems with tooling and production, resulting in a superior product.

            All of Regal’s products, from its $14,000 18-foot boat to the $500,000 42-foot Commodore yacht, follows a similar production process. Hulls and decks are separately hand-produced by spraying preformed molds with three to five layers of a fiberglass laminate. The hulls and decks harden and are removed to become the lower and upper structure of the boat. As they move to the assembly line, they are joined and component added at each workstation.

            Wooden decks, precut in-house by computer-driven routers, are delivered on a just-in-time basis for installation at one station. Engines–one of the few purchased components—are installed at another. Racks of electrical wiring harnesses, engineered and rigged in-house, are then installed. An in-house upholstery department delivers customized seats, beds, dash-boards, or other cushioned components. Finally, chrome fixtures are put in place, and the boat is sent to Regal’s test tank for watertight, gauge, and system inspection.

            Global firms like Regal Marine know that the basis for an organization’s existence is the good or service it provides society. Great products are the keys to success. Anything less than an excellent product strategy can be devastating to a firm. To maximize the potential for success, top companies focus on only a few products and then concentrate on those products. For instance, Honda’s focus is engines. Virtually all of Honda’s sales (auto, motorcycles, generators, lawn mowers) are based on its outstanding engine technology. Likewise, Intel’s focus is on computer chips and Microsoft’s is PC software. However, because most products have a limited and even predictable life cycle, companies must constantly be looking for new products to design, develop, and take to market. Good operations managers insist on strong communication among customer, product, processes, and suppliers that results in a high success rate for their new products. Benchmarks, of course, vary by industry, but Regal introduces six new boats a year, and Rubbermaid introduces a new product each day!

            One product strategy is to build particular competence in customizing an established family of goods and services. This approach allows the customer to choose product variations while reinforcing the organization’s strength. Dell Computers, for example, has built a huge market by delivering computers with the exact hardware and software desired by end users. And Dell does it fast—it understands that speed to market is imperative to gain a competitive edge.

            Note that many service firms also refer to their offerings as products. For instance, when Allstate Insurance offers a new homeowner’s policy, it is referred to as a new “product.” Similarly, when Citicorp open a mortgage department, it offers a number of new mortgage “products.” Although the term product may often refer to tangible goods, it also refers to offering by service organizations.

            Effective product strategy links product decisions with investment, market share, and product life cycle, and defines the breadth of the product line. The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage. A product strategy may focus on developing a competitive advantage via differentiation, low cost, rapid response, or a combination of these.

Questions:

Questions:

1.Identify the strengths, weakness, opportunities, and threats (SWOT) that are relevant to the strategy of Regal Marine.

2.What are the operations strategies of Regal Marine?

3.How does Regal Marine operations strategy provide a competitive advantage?  

4. What future changes would you recommend to enhance the production processes at Regal Marine.

Answer 1

1. Strengths, weakness, opportunities and threats (SWOT) that are relevant to the strategy of Regal Marine are mentioned below:

Strengths:

a) Wide product line consisting of 22 different models of boats.

b) Worldwide suppliers which ensures flexibility.

c) Focus on quality. Believes in delivering high class, best in quality goods.

d) Three dimensional computer aided system.

e) Well positioned on the super boat market especially luxury market.

f) Continuous innovation

Weaknesses:

a) Constant pressure to lower cost of production.

b) Not enough in house quality.

Opportunities:

a) They can try to produce in a lower cost by reducing design times, production times, improving processes and using alternative materials and products.

b) It can increase its hold on the market by adopting backward integration strategy which means it can become the supplier itself.

c) They can also try to have cheaper boats in order to have wider range of costumers.

d) Can increase market size by finding competent and effective dealers in the world.

Threats:

a) Changing consumer tastes & preferences.

b) Large number of competitors

c) New entrants in the industry can put cap on their profits.

d) This business is very susceptible to economical crisis. When there is an economical slowdown the people don’t “invest” on this market.

2) Regal Marine follows differentiation strategy that is they believe in delivering high quality distinctive products to its customers. High quality differentiated products have high value for the customers. This strategy is based on constant innovation, unique features & high quality. Such strategy plays a very important role in gaining competitive advantage. The company's operation strategy drives the boat main manufacturing process. The organization is continuously working on lowering production costs, reducing cycle time, improving process & using alternative products. It has large number of dealers in US and they also ship their products to around 40 countries in the world. The organization is continuously working to accomplish its goals.

3) By delivering differentiated products Regal Marine is able to gain competitive advantage. High quality distinctive products are always preferred by customers because of their high value. So, Regal is able to attract customers by providing such products & is able to capture higher market share. Also it is difficult for competitors to copy innovative products which act as an barrier to their entry in Regal Marine's market. Therefore, differentiated products lessen competition & hence provide competitive advantage.

4) I would like to recommend the following changes to enhance the production processes at Regal Marine:

a) It is very much dependent on its suppliers for various parts of the boats. It should focus on backward integration strategy i.e. by becoming supplier itself.

b) Producing differentiated products is always asociated with high production costs, So, some measures should be adopted to lower the production costs. This can be done by reducing design times, production times, improving processes and using alternative materials and products.