Strategic Positioning Tartan Corporation has been manufacturing high-quality home lighting systems for more than 90 years. The company’s first products in the 1920s—the Classic line—were high quality floor lamps and table lamps made of the highest quality materials with features that other manufacturers did not attempt: multiple switches, adjustable heights, and stained glass. In the 1950s and 1960s, the company introduced a number of new products that were in demand at the time, including track lighting and lava lamps, which became the company’s Modern line. A new customer style emerged in the 1960s and 1970s, which resulted in another new line of products, Contemporary. It was followed in more recent years by two new product lines, Margaret Stewart and Western. In developing and marketing the new styles, the company took advantage of the favorable reputation of the Classic line which was the foundation of the favorable image of the company overall and which also helped in the sales of the new lines. Jess Jones, the company’s chief financial officer, had become concerned about the performance of some of the product lines in recent years. Although total sales were growing at an acceptable rate, approximately 10% per year, the sales mix was changing significantly, as shown in the following product line sales report. Jess was particularly concerned about the Classic line because of its sharp drop in sales and its high costs. Because of the high level of craftsmanship required for the Classic line, it always had higher-than-average costs for labor and materials. Furthermore, attracting and retaining the highly skilled workers necessary for this product line was becoming more and more difficult. The workers in the Classic line in 2019 were likely to be older and very loyal employees who were paid well because of their skill and seniority. These workers displayed the highest level of workmanship in the company and, some would argue, in the entire industry. Few newer employees seemed eager to learn the skills required in this product line. Moreover, manufacturing capacity was experiencing an increasing strain. The sharper-than expected increase in sales for the Western styles had created a backlog of orders for them, and plant managers had been scrambling to find the plant capacity to meet the demand. Some plant supervisors suggested shutting down the Classic line to make capacity for the Western line. Some managers of the Margaret Stewart line argued the same thing. However, eliminating the Classic line would make obsolete about $233,000 worth of materials inventory that is used only in the manufacture of Classic line products. Tom Richter, the firm’s sales manager, acknowledged that sales of the Classic line were more and more difficult to find and that demand for the new styles was increasing. He also noted that the sales of these products reflected significant regional differences. The Western line was popular in the South and the West, and the Contemporary, Modern, and Stewart styles were popular nationally. The Classic line tended to have strong support only in the northeast states. In some sales districts in these states, Classic sales represented a relatively high proportion of total sales. Kelly Arnold, the firm’s CEO, is aware of these concerns and has decided to set up a task force to consider the firm’s options and strategy in regard to these problems.
Required 1. What is the competitive strategy for Tartan Corporation? a. Cost leadership because of increased competition b. Differentiation because of innovation c. Differentiation because of unique products and high quality d. Cost leadership because of cost pressures in the industry 2. What recommendation would you make to the task force? a. Delete the Classic line for the cost savings. b. Continue the Classic line because it supports the company’s strategy. c. Delete the Classic line because of its poor sales performance. d. Continue the Classic line to save costs. 3. Briefly explain your answers to requirements 1 and 2.