Bombardier has brought the manufacturing operations of Outboard Marine Corporation and has done a good job of turning it around. Now, Bombardier has ambitious plans of increasing the production to 60,000 engines a year. These plans can be successful if Bombardier overcomes the hurdles it faces. I feel that Bombardier purchased OMC in the first place because of several reasons. The acquisition complemented Bombardier’s transportation activities. On one side the acquisition gives Bombardier access to new geographical markets, on the other hand it increases the repertoire of Bombardier’s products and services (Hellriegel.
D, Jackson. S & Slocum 59). In addition, the acquisition helps Bombardier to broaden its capabilities, know-how and assets. On the other hand if Bombardier can use the engines produced by OMC in its own products it would be a case of vertical integration and give competitive advantages to Bombardier. Moreover, the time when Bombardier bought the manufacturing operations of OMC, the market share and the stock prices of OMC had plummeted. In other words, OMC was an excellent buy for Bombardier. This acquisition would enable Bombardier to acquire great manufacturing ability at rock bottom prices.
Bombardier could have taken a different approach. It could have set up new facilities for manufacturing of engines; it could have expanded its channels of distribution to new geographical areas and could have located its new branches in areas that would bring it new advantages. One approach that Bombardier could have taken, is that of globalizing its operations. Opening manufacturing facilities in countries that provide it with advantages of easily available labor and low cost material would have given it cost advantage. For this reason it would be advisable for Bombardier to open its factories in South East Asian countries.
The increased capacity would have to be marketed in new geographical areas all over the world. The apparent approach of the team established to deal with the operations of newly acquired OMC is to take a proactive approach to improve the quality of the products and streamline its operations. In this regards the team reduced the distance parts had to be transported. The approach was to shut down two plants and reduction of production in a third plant. The team also improved the assembly line at Wisconsin plant. In short the approach of the team was to centralize the production process and cut down the transportation cost.
With regards to the team members, the member from the plant maintenance team would focus on improving the maintenance of the Wisconsin plant. He would aver that maintaining nine facilities scattered around the US was difficult. The operations member in the team would ascertain the weaknesses in the production process and suggest that a centralized production process would help improve and speed up the production process. In addition, he would also suggest that some employees need to be changed so that the new production process could easily be started.
Further, the operations person would insist that every unit of engine made at the new facilities should be durable and reliable. The marketing team member would insist that it was imperative that the engines produced at the new facility should be of the highest quality otherwise it will be difficult to regain the market share. Moreover, Bombardier should offer a three year guarantee to meet the requirements of the marketing department. The finance member would insist that the inventory level be reduced so that the company reduces its costs.
Quality control member would insist that the quality of its engines were best in the market. This change was important, he would insist. There will be several new challenges that Bombardier is likely to face as it expands the production to 60,000 units at the Wisconsin unit. First, Bombardier would have to recruit suitable personnel who have the training and skills required for this large scale production. Second, Bombardier would have to establish the supply chain for the larger production, including establishing a computerized communication system with the suppliers.
Third, Bombardier spent $50 million to upgrade the plant, now it will require much more capital to upgrade and expand the facilities at the plant. This means a large long term investment. Bombardier has to get the investment. Fourth, Bombardier has to set up quality control measures that would ensure that the engines made by Bombardier are up to the high quality and reliability standards. Fifth, to keep up the production in a much expanded facility it may become imperative that Bombardier keep a much larger inventory of parts and components.
This can increase the cost to the company. Finally, Bombardier will face the problem of marketing the 60,000 units that will be produced. This will be a great challenge for the marketing team. Bombardier should prepare for these challenges by adopting sound recruitment and HRM policies, stringent quality control measures, raise long term capital through issue of equity, introduce the just-in-time system, develop new channels of distribution all over the world and develop a brand image in the international markets.
To sum, Bombardier acquired the manufacturing facilities of OMC to gain competitive advantage. To an extent Bombardier has succeeded in making the acquisition profitable. However, Bombardier needs to take several steps to overcome obstacles for meeting its goal of a nine fold increase in production at Wisconsin plant. Reference: Hellriegel. D, Jackson. S & Slocum. J, Management: A Competency-based Approach, Thomson South-Western, 2005.