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LIBA 2010-2012

Case Analysis - Globalizing Consumer Durables: Singer Sewing Machine before 1914
Submitted By: Vaibhav Mehta [F10057]

Introduction:
In 1914, Singer Sewing Machine Company was the market leader in sewing machine market with annual sales of 2.5 million sewing machines and was the seventh largest firm in the world. The main drivers for this phenomenal success were extraordinary leadership, marketing ingenuity, organizational adaptability and continuous improvement of the product, which waas among the most important inventions of the 19th century. The sewing machine was not only able to meet the needs existing at that time but was able to generate and serve many new needs in that period of time. It created new markets for ready to wear clothing, shoes, an dvirtually all textile home goods, including canvas, sheets, drapes, curtains, rugs, blankets, and towels. The company ventured into new overseas market, which none of the firm of that time considered due to the high risk, and became the worlds first multinational firm. This led to the creation of some of the management practices that are primitive to the practices that are being followed today. It pioneered the creation of internal credit business, door to door salesforce, etc. Their founders i.e. I.M. Singer and Edward Clark took the company to great heights by applying some state of the art management techniques, which serve as a core model of many of the multinational corporations of the day. On one hand I.M. Singer was the man who was behind the invention of the first Singer sewing machines while on the other hand Edward Clark was responsible for making Singer Sewing Machine into a global success. They left a legacy that consisted of numerous business innovations and effective practices.

Problem:
The sudden dip in the sales across all the major countries in which singers has its presence, in 1914. The lack of management talent in the company in the coming years. The huge financial commitments taken in the non war perios poses a big challenge for the firm in the current war period.

Strategies followed by the firm till now:

Introduction of the Hire Purchase plan by the company to counter the effect of low sales due to high price. This strategy helped the firm to push the products in many households which couldnt afford to pay the whole price of $100 at one go. Trade in programs helped the firm to create new customers and break their loyalty from their previous brands. Offering of free sewing machine lessons, free sewing, machine instruction manuals, and illustrated catalogues describing the companys line of family and commercial sewing machines. In this way he refused to compete on price. Opening of the factories at overseas locations inspite of the various challenges posed by the environments of the respective countries. This helped the company in brand building, improved supply chain and increased capacity to handle the variability in the demand. Standardization of the practices across the organization. Door to Door selling helped the company to penetrate in the markets and later on build stores after the respective markets have been sufficiently developed. Introduction of the concept of variable pay which pushed the sales force to perform better in order to achieve more personal gains. The development of Fidelity and Gurantee funds which enhanced the performance of the organization further. Also these assured against dishonesty and embezzlement. Acceptance of Barter installments in order to avoid bad account practices and increase effective sales. Tripling the nominal capital to minimize the impact of the taxes.

Quoting low prices for volume sales helped the organization to increase the sales.

Applicability and Effectiveness of the existing strategies in War Period :

At the start of the World War I in 1914, Singer had significant financial commitments in the countries that were about to go to war with one another. Over and above it all the managers that had propelled the Singer Machine Sewing Company to greatness over the years were dead or had left the company. This posed lot of challenges before the company as a result of the changing environment. As a result the effectiveness of the past strategies comes into question during the war period. Analysis of some of the strategies is being done here : 1. In War situation the Hire Purchase Plan will not work at all as many of the customers will default in wake of the risk posed by weak economy as a result of war. 2. Standardization will be the best practice no matter which environment it is in 3. Door to Door Selling will not be possible as the buying power of the consumers have decreased and the additional expenses employed in this additional salesforce will result in bringing down the bottom line further. 4. Barter Exchanges provide scope for increasing the sales in tough times as it can absorb the effect of low liquidity in the economy. 5. The dedicated work force is the key for world class organizations to remain strong at all times 6. Establishing of World Class factories located in US, UK, Russia is good as it helps to diversify the risk associated with the shutting down of the operations of the company due to serious damage caused at the location of companys single manufacturing facility. 7. Combination of Fixed & Variable salaries is as good as during War & after War as in normal times

Conclusion
Singer should survive the crisis as it has many strong points which diffrentiates itself from its competitors in the market segment that has yet a very strong potential: Dedicated employees. Brand visibility Diversified investment across geographical regions. Legacy of innovative techniques and learnings left over by the pioneer managers. Proven track record of performance and trust.

First Years:
After inventing the machine, I.M. Singer tried to promote the machine at many shows, circuses and showrooms. But eventually he ran out of money and considered forming a partnership with Edward Clark. Both introduced the machine in the market. The market did not offered them the required demand as many consumers awaited a machine which is less complex and inexpensive. Also due to the numerous patents on various machine parts, many competitors used to file spate of lawsuits against the manufacturers that limited the profit even more. Due to this intense competition the convention of territory rights came into picture, which gave individuals the right to sell a given brand in a given region of the country. But this had many downsides like ceding control over sales in a given region, etc. To counter this, Clark opened branch offices at major locations in major cities of USA. Clark also tried to expand overseas but failed in this initiative. Eventually Albany agreement came in, which led to the cartel formation by four major companies holding patents to sewing machines 10 basic components . Singer introduced its first machine that as targeted for home users at $100. For marketing the product Clark introduced the hire purchase plan, which enabled consumers to use the machine and make payments at regular intervals in installments. This pushed the product in many households. On the european front he created a saleforce that was specifically dedicated to the selling of Singer Sewing machines only. In 1863, the annual unit sales reached 20000 units. The Civil war led to decline in sales in the domestic market, forcing the company to concentrate more on the sales from overseas markets.

The British Market