Le Petit Chef (LPC)

Team 1
Janice Farone
Paul Gebel
Bill Howe
Art Zion
Tablé of Contents
 La crise
◦ Identifier
◦ Recommander
 Stratégie
◦ Technologie
◦ Culture
◦ Compétences de base
 Architecture intégrée de la conception
du produit
◦ Le marché
◦ Fondement de la concurrence (courbe en S
Stretcher)
The Crisis According to LPC
 LPC recognized the need for a low-cost
model, but there was interdepartmental
strife between R&D and Marketing
◦ Cost reducing Egalite was a waste of effort
(Engineer quoted saying, “…trying to trim a
Mercedes down to a Fiat.”)
◦ Engineers were dismissing Egalite as a viable
product
 Thecrisis was aggravated by several
contributing factors
◦ R&D expenditures were twice the industry avg.
as a % of sales
◦ Resource contraints due to concurrent 7 projects
◦ Briggitte wondered if she should ask for more
The Crisis According to
Team 1
 Brigitte and Senior Mgmt are not addressing the
right problems
◦ The strategy was built to compete in the first stage,
but the market was in the fourth stage
◦ “We have already realized all possible cost
reductions… Still above competitor’s cost levels…
The proliferation of new model/accessory
combinations in the Liberte and Egalite lines has
added substantially to manufacturing complexity.”
 Increasing competitive pressures and new
entrants from larger European players that have
moved upmarket away from the low cost Asian
producers
◦ Asian low-cost suppliers developed fuzzy logic based
controls
The Crisis According to Team
1 (cont.)
 Can’t succeed in the low end, because of
the inherent costs of an integral architecture
 Marketing decisions are being made by the
R&D head
◦ Origins of the company
◦ Culture is geared toward developing features for
their perceived consumer demographic
◦ They want to dump money into R&D
 LePetit Chef’s competitors had successfully
closed the performance gap
◦ In response to this, LPC’s decision reflected the
active inertia of their senior management
◦ They wanted to do what they always do - only
Strategy
 Corporate strategy
◦ They sustain innovations (i.e. S-curve
stretchers)
◦ The closeness to the customers, and
resultant up-market movement is the
foundation of Le Petite Chef’s success
(Virtous Cycle)
◦ Products differentiated on technical
innovation and performance features
 Technology Strategy
◦ R&D leads the development, refinement,
and selection of products that go to market
◦ They select the projects that get funded
Basis of Competition
Builtfor, and operating in the first
stage of the basis of competition
◦ Market has already moved onto the
fourth stage, but Le Petite Chef is still in
the first stage
Price and visible feature
differentiation is paramount to
competition in this market
◦ (p.7) “Main priority is meeting our
customers’ needs by maintaining the
technical and innovative edge of our
products which underpins our strategic
Integral Model
Isit integrated product
architecture/vertically integrated
◦ R&D staff worked closely with
manufacturing, sales and service
◦ Technical skills
◦ Le Petite Chef holds a lot of tacit
knowledge surrounding French…
Losing market share. Is market shrinking? Are
they losing value?
Low cost product is coming up underneath
them, because other firms have moved up
market
◦ No one wants to compete head-to-head
Innovator’s Dilemma
Innovator’s dilemma
◦ Signs… maintained price premiums
by renewing product offerings
frequently
◦ 10 year momentum of profits… They
experienced their first loss
◦ Revenue stream…
◦ Impossible to sustain premium prices
for new models (i.e. the customer is
no longer willing to pay – see
Exhibit 11).
Integral Architecture
for Product Design
 In most industries there will simultaneously be pressure
to integrate product designs and value chains and
disintegrate them.
 Two factors encourage integral product designs and
integrated value chains:
◦ The desire to squeeze maximum performance out of a
given set of component technologies and product
architecture. This is “S-curve stretching.”
◦ Uncertainty related to possible new technologies. This is a
reluctance to do “S-curve jumping.”
 One factor encourages modular product designs and
disintegrated value chains:
◦ Market pressures related to incremental product
performance improvements, time-to-market, and costs.
Analysis of LPC Business
Model
 Evidence for vertical integration
◦ The organization is driven by the R&D
product development
◦ The organization encouraged strong cross-
functional coordination and cooperation
◦ Vertical integration is shown through their
strong control over suppliers and outbound
logistics
◦ Recent market developments: Asians are
more modular, due to fuzzy logic attribute
 Market inferences
◦ Notable success, possibly due to modularity
◦ Asian manufacturers have taken the low-
Recommendations
A. Move into Stage 5 to provide “customer wow” as a niche player,
but to a shrinking market (“Innovative design” and “high
performance”)
◦ Pros: Consistent with current strategy. Could delay shrinking market.
◦ Cons: Shrinking market. S-curve has assymptoted. Diminishing returns.

B. Court an Asian low-cost producer, by leveraging their brand

identity to outsource production of microwaves
◦ Pros: Acquire the core competencies of a modular approach. Low-cost option
◦ Cons: Built around R&D, which would experience drastic cuts (possible “Pro”).
Cannot be the lowest low-cost, and can only retain limited differentiation.

C. Internal Modularity – Spin off a subdivision for low-cost “fuzzy

logic” production
◦ Pros: Remain vertically integrated, which emphasizes core competencies. Gain the
benefits of a disaggregated value chain in a modular approach
◦ Cons: Destroy all tacit knowledge inherent to the informal interactions

D. Exit Strategy
◦ Bailout (Ask President Obama for a Billion dollars, and install a microwave in every
Microwave Oven Cook-Off
Performance Test Data