Introduction
Wilkerson is a leading manufacturing business in the production of pumps, valves, and the flow controllers. For many years, it has operated unchallenged until recently. The gigantic pump manufacturer is now experiencing a highly a competitive show in the market, a factor that has made it reduce prices for its products in the market. The result is that Wilkerson is making losses and has to conduct an investigation on its cost mechanisms and be able to decide their applicability regarding cost cutting, about those that are used in the market. For the company to gain its stability in terms of profit gains, it should identify proper twists for its products in the market.
As a successful company that has been in the business for many years, every competitor who gets to the market aims at beating Wilkerson. Most of this infant industries have adopted the method of strategic profit measuring proportionate to the contribution margin. This means introducing variables with fewer prices into the market. For its survival, Wilkerson has no option but to adapt to such likes of strategies for one, to stand the competition and two, to avoid making losses by making very insignificant sales in the market. However, as this is underway, a question of concern has been raised on several occasions, what exactly is leading to the decline in the total periodic gross margin? Could it be Wilkerson’s cost inhibitive production of water pumps and its inability to assign the manufactured cost of its products about market prices?
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The price method used by the Wilkerson currently is the problem. The methods do not project the reality of prices of the commodity in the market about its manufacturing cost. This means that the manufacturing cost at some point may be higher than the selling price or equal to the selling cost. If at all there is a profit made, it’s of a very narrow margin. Robert Parker, the president of the company, has made several meetings with the manufacturing managers to discuss the eventual course of the company.
Competitive Situations that are currently faced by the Wilkerson’s Executive
Some of the problems that have surfaced, thanks to Parker’s meetings with his executives, is that the company lacked enough components and labor compared to the pumps and the valves that are manufactured. Variables mentioned as controllers were identified as devices that controlled the direction and the rate of chemical flow. It was realized that the company hiked its prices for controllers by a 10% increase in cost without any clear increase in demand for its products.
Secondly, on the production of valves, it was realized that four various machine components were used. An employee, Scott designed machines which held components in fixtures, in a manner that they could not be automatically machined. It should be noted that one of the major products that the company deals with are the valves. Any interference with this commodity means doom for the company. In this case, it was realized that although Scott thought that most competitors could not afford much Parker’s quality valves, not even one of the valves had tried to gain the market share by cutting price and even the company’s profit margin had been maintained.
Lastly, there was a harmonious conclusion between the president of the company, Robert Parker, his controller, Peggy Knight, and his manufacturing manager, John Scott on the major product lines for the company and the production of pumps. One of the major production lines had led to losses in the company due to a decline in the pumps prices. President Parker suggested a match in the prices that had been reduced to maintain the volume.
Reference
Kaplan, R. S. (2018). Wilkerson Company . Harvard Business School of Publishing.
