DigiMaxCon (A): The Case of the Shrinking Margins1

It is late spring and time for the DMC management team to begin the planning cycle for the next fiscal year. While CEO Tom Grant has always preferred the tried and true business strategies from Michael Porter (cost leadership, differentiation and market focus), he knows the executive team needs to be creative to set the path for the future of the company during the new planning cycle. In this highly competitive global market, DMC will face many challenges in choosing a strategic plan for the next five years. The current strategic plan includes a goal of increasing electronic component sales while establishing a more stable sales pattern and margins, but this goal is not going well. Grant …show more content…

They did not believe the future evolved from forecasting or planning in the technology world. The company identified outstanding managers coming up through the ranks, selected a few each year, and gave each $5 million to “make something happen.” With three or four new product efforts each year, they recognized most might fail, but hoped the winners would make up for the losers. They created their own brand of personal computer, touch screen monitors, midmarket assembly operations, and other technology products. As expected, most of these products did not make an impression in their respective markets. Failed product executives left ( “left” seems too weak since they were forced out, this is an added element of pressure on VP’s) the company. Successful startup projects became separate businesses until acquired or merged into other entities.
By the twenty-first century, DMC had grown to become a multi-billion dollar company, consistently ranked in the top five in their industry. Between 2008 and 2012 combined sales from internally developed product lines, acquired companies, and joint ventures increased from a little over $5 billion to over $8 billion, but returns showed great profit and loss swings (see Table 1). These ranged from a net loss of $1.9 billion in 2009, to a net income of $1.9 billion the next year, to a net loss of $1 billion in 2012, the most recent reporting year.