Case Study

Case Study
Simak Accessories Limited (“SAL”)
Simak Accessories Limited (“SAL”) was founded two years ago with the
objective of manufacturing Selfie Sticks for the smartphone market. The
founder, Daz Clifford set out five objectives for the company to focus on in
its first five-year strategic cycle:
 Establish a reputation for a reliable product in the marketplace
 Ensure that the product’s features remain relevant as technology
and customer needs develop
 Establish a motivational environment for employees
 Reduce the company’s environmental impact
 Deliver profitability and growth in shareholder value
In the first year SAL achieved sales of 30,000 units, revenue of £660,000
and an operating loss of £91,000.
In this, their second year, they have generated revenue of £1.2M from the
sale of 48,000 units but generating an operating profit of only £45,000. The
Directors are disappointed with a volume growth rate of only 60% when
they had hoped to double the number of units sold, and an operating
margin of only 4%.
The Directors held a Board Meeting where the main agenda item was the
investigation of the stuttering growth rate. During the meeting, the Directors
received reports from a number of the managers:
Extracts from the manager reports are as follows:
 Marketing Manager: “I estimate that negative social media chatter
generated by customers receiving selfie sticks that did not work or
did not deliver all the functionality promised, has lost us at least 20%
of additional sales”
 Production Manager: “Our production line is automated of course,
but sometimes the shop floor staff make mistakes and poor choices
regarding refilling the machinery with the plastic resin, the setting of
tolerance levels on the compiler and the maintenance of the
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machinery on the production line. These mistakes create waste,
which we have to dispose of straight away or result in sticks that are
rejected during inspection. I would like to switch the resin supplier to
one where the resin can be recycled rather than disposed to landfill.
This new resin will cost £0.50 per unit more, but will reduce disposal
costs by 85%. Given more resources, we could do a lot in in this
department to improve quality.”
 Customer Services Manager: “My team have been inundated with
unhappy customers this year! We have had to exchange 4,800
units, which is 10% of our total sales. This has cost us in terms of
transport costs paying for the items to be returned and then new
ones sent out again. And don’t forget the cost of our time dealing
with these calls when we could be calling potential new customers in
the retail chains we have targeted, generating new sales leads.”
 Design Manager: “I had no idea that there were so many problems
reported by our customers. Why has no one told my team about
this? At the moment we probably only spend the equivalent of one
day (8 hours) per week on revisiting the basic design for quality
improvements. Clearly, we should do more about incorporating
these reported issues into that work. If we were to double the design
hours devoted to addressing the product faults highlighted by
customers, I am confident we could reduce the number of customer
rejections by 75%.”
 Inspection Manager: “I am so frustrated. We are constantly finding
problems with the end product but I don’t have the resources to
inspect as many batches as I feel we should, especially earlier in the
process that would result in less wastage.”
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