a strategic management case study matthew o’malley spenser ouellette kristi plourde robert roy

A Strategic Management Case Study

Matthew O’MalleySpenser Ouellette

Kristi PlourdeRobert Roy

O’Malley, Ouellette, Plourde, Roy 2009 2

• Company Overview

A Brief history of Winnebago IndustriesExisting Mission and VisionExisting Objectives and Strategies Current Issues

• New Mission and Vision

• External Assessment

Industry analysisOpportunities and threats EFE MatrixCPM Matrix

• Internal Assessment

Strengths and weaknessesFinancial Condition IFE Matrix

• Strategy Formulation

SWOT MatrixSpace MatrixIE MatrixGrand Strategy MatrixMatrix AnalysisQSPM Matrix

• Strategic Plan for the Future

ObjectivesStrategies

• Implementation Issues

EPS/EBIT

• Evaluation

• Winnebago: 2008 Update


•Headquartered in Forest City, Iowa.

•Incorporated in 1958 and adopted present name in 1961.

•Have approximately 310 dealer locations.

•Sold through dealers under Winnebago and Itasca brand names.

•Leading manufacturer of motor homes.

•Build quality motor homes with state of the art computer-aided design and manufacturing systems on automotive styled assembly lines.


•1958- John Hansen and others convinced a California company to open a travel trailer factory in Forest City.•1960- The name of the company was changed to Winnebago Industries after the operation was purchased by 5 Forest City residents and Hansen became president.•1966- First motor home came off Winnebago assembly lines, selling for half the price of competitors because of manufacturing innovations and use of assembly lines.•1970- Listed on NYSE and appreciated 462 percent the next year.•1975- Itasca line was introduced.•1977- Sold their 100,000th unit, first RV manufacturer to reach that level.•1986- First appeared on the Fortune 500 . Ranked 500th in sales and 340th in net income.


•1989-1992- Posts losses each year, partly because of decrease in demand because of the recession, and also the Gulf War and fears of an oil shortage. Total loss is over $50 million for those four years.•1997- Earnings and revenue fall due to a weakening motor home market.•1999- $3.6 million expansion plan is announced for their manufacturing facilities in Forest City.•2000- Sales increase 11% to reach record of $743.3 million.•2001- Net income decreases 12% on revenues of $675.9 million, 9.5% lower than previous year.•2004- Profits reach unprecedented high at $70.6 million while sales exceed $1 billion for the first time.•2006- Because of economic conditions, begin marketing more affordable products such as the Winnebago Access.


1960’s 1970’s 1980’s

1990’s 2000’s


Class A models are conventional motor homes constructed directly on medium-and heavy-duty truck chassis, which include the engine and drive-train components. Gas or Diesel- 33 to 37 feet in length. Can sell for over a quarter of a million dollars

Class C models are mini motor homes built on a van type chassis onto which the home manufacturer constructs a living area with access to the driver’s compartment. Gas or Diesel- 22 to 31 feet in length.


Winnebago Industries is a leading United States manufacturer of motor homes and related products and services. Our mission is to continually improve

our products and services to meet or exceed the expectations of our customers. We emphasize

employee teamwork and involvement in identifying and implementing programs to save time and lower

production costs while maintaining the highest quality of products. These strategies have allowed

us to prosper as a business with a high degree of integrity and to provide a reasonable return for our

shareholders, the owners of our business.


•“Quality is a journey-Not a Destination.”

•What do we want to become?

•Our vision is to become the Global leader in manufacturing and sales of Recreational Vehicles.


Winnebago Industries, Inc. is the leading United States manufacturer of motor homes and related products and services. Our mission is to become the global leader in manufacturing and sales of motor homes and related

services. We believe that quality is a journey-not a destination. By utilizing our employee teamwork and

implementing the latest and greatest use of technology we have acquired the safest, largest and most

technologically advanced motor home manufacturing facility in the world! With this facility we provide top notch quality and customer satisfaction and service

which is essential to the long term growth and profitability of our company. We are an environmentally

concerned company and we continue to look for new and innovative ways to fuel our line of recreational

vehicles.


•R & D : Develop new products for the motor home consumer with emphasis on quality, safety and function.

Keeping growing market of baby boomers in mind.

Target Market of people 50 and older.


People: Our employees are the source of our strength.

Products: Our products are the end result of our teamwork and they should be the best in meeting or exceeding our customers’ expectations.

Plant: We believe our facilities to be the most technologically advanced in the RV industry.

Profitability: Profitability is the ultimate measure of how efficiently we provide our customers with the best products for their needs.


Quality comes first.

Customers are central to our existence.

Continuous improvement is essential to our success.

Employee involvement is our way of life.

Dealers and suppliers are our partners.

Integrity is never compromised.


•Growing demand for recreational vehicles (U.S Sales of RVs annual growth rate 4%)

•Demand for modular homes (15-20% reduction in costs compared to on site-built homes)

•Eco-Friendly RVs (Hybrids)

•International Markets

•Recreational Vehicles Industry Target Market- Baby Boomers (50-65) is expected to grow almost 4% annually until 2010. (US Census Bureau)

•Increased demand for high priced amenities and facilities. (fireplaces, refrigerators, gourmet kitchens, wine cellars, home theaters)

•Fastest Growing RV owner demographic is 18-34 year olds.


•High Fuel Prices

•Intense Competition (Coachmen Industries, Fleetwood Enterprises Inc.)

•Seasonality Business (Weather Conditions, Seasons)

•Strict Regulations both State and Federal (NHTSA, TREAD)

•Economic Slowdown (GDP Growth of US Economy expected to be 2.8% in 2008 a .05% decrease since 2006)

•Potential Liabilities (comprehensive service program, warranties)

•Interest Rates


Key External FactorsWeight

s RatingWeighted

Score

0.0 to

1.0 1 to 4 Opportunities

Growing demand for recreational vehicles (U.S Sales of RVs annual growth rate 4%) 0.08 4 0.32Demand for Modular Homes (15-20% reduction in costs compared to on site-built home) 0.06 2 0.12Develop new RVs that are eco-friendly (Hybrids) 0.07 2 0.14Enter International Markets (Canada, Europe, Asia) 0.08 2 0.16RV Industry Target Market- Baby Boomers (50-65) is expected to grow almost 4% annually until 2010) 0.07 4 0.28Increased demand for high priced amenities and facilities (fireplaces, gourment kitchens, wine cellars) 0.06 4 0.24Fastest growing RV owners is young people (18-34) 0.07 4 0.28 0 0 0Threats 0High Fuel Prices 0.08 2 0.16Intense competition (Coachmen Industries, Fleetwood Enterprises Inc.) 0.09 4 0.36Seasonality Business (Weather Conditions, Seasons) 0.09 3 0.27Strict Regulations both State and Federal (NHTSA, TREAD) 0.06 4 0.24Economic Slowdown (GDP Growth of U.S Economy expected to be 2.8% in 2008 a .05% decrease since 2006 0.06 2 0.12Potential Liabilities (Comprehensive Service Program) 0.06 4 0.24Interest Rates 0.07 2 0.14 0 0 0 0 0Totals 1 3.07


Winnebago Fleetwood ThorCritical Success

factorsWeights Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

0.0 to 1.0 1 to 4

1 to 4

1 to 4

Market Share 0.12 4 0.48 3 0.36 2 0.24Financial Position 0.12 4 0.48 3 0.36 3 0.36Global Expansion 0.07 2 0.14 2 0.14 2 0.14Customer Service 0.07 3 0.21 3 0.21 3 0.21Advertising 0.05 3 0.15 2 0.1 3 0.15Price Competitiveness 0.09 4 0.36 3 0.27 3 0.27Product Innovation 0.1 3 0.3 4 0.4 3 0.3Product Quality 0.09 4 0.36 4 0.36 4 0.36Customer Satisfaction 0.07 3 0.21 3 0.21 3 0.21Management 0.09 3 0.27 4 0.36 3 0.27Sales Distribution 0.07 3 0.21 4 0.28 3 0.21Production Capacity 0.06 3 0.18 4 0.24 2 0.12Totals 1 3.35 3.29 2.84


•Strong Brand (Winnebago, Itasca)

•Leading Market Position (RV Industry)

•Research and Development Facility (start of the art systems)

•Product Innovation (25 model lines with 93 floor plans, 49% were new or redesigned for 2008)

•Strong Financials (no long-term debt, own building, land, equipment)

•Good Cash Reserve ($6,889,000)

•13-Point Code of Ethics


•Overdependence on the US Market

•Industry is affected by economic conditions and Per Capita disposable income

•Net Income decreased 7.1 percent in fiscal 2007

•Only has 4 facilities located all in Iowa (incurs significant distribution expenses)

•Functional Organizational Structure

•Company Growth (not taking advantage of low interest rates and there financial strength)

•Dealership Networks (only have 290 dealers in the U.S and a limited amount in Canada)


Key Internal Factors Weights Rating Weighted Score

0.0 to

1.0 1, 2, 3 or 4 Internal Strengths 3 or 4 Strong Brands (Winnebago, Itasca) 0.1 4 0.4Leading Market Position (RV Industry) 0.09 4 0.36Product Innovation (25 model line with 93 floor plans, 49% new or redesigned for 2008 models 0.06 4 0.24Strong Financials (no long-term debt, own building, land and equipment) 0.08 4 0.32Good Cash Reserves ($6,889,000) 0.07 4 0.28Research and Development Facility (state of the art systems) 0.08 4 0.3213-Point Code of Ethics 0.06 4 0.24 0 0 0Internal Weaknesses 1 or 2 Overdependance on the US Market 0.07 2 0.14Industry is affected by economic conditions and Per Capita disposable income 0.07 2 0.14Net Income decreased 7.1 percent in fiscal 2007 0.06 2 0.12

Only has 4 facilities located all in Iowa (incurs significant distribution expenses) 0.06 2 0.12Organizationl Structure 0.06 2 0.12Company Growth (not taking advantage of low interest rate and there financial strength) 0.07 2 0.14Dealership Networks (only have 290 dealerships in U.S and a limited amount in Canada) 0.07 2 0.14 0 0 0 0Totals 1 3.08


PERIOD ENDING 30-Aug-08 25-Aug-07 26-Aug-06Total Revenue 604,352 870,152 864,403 Cost of Revenue 569,580 770,955 759,502 Gross Profit 34,772 99,197 104,901

Operating ExpensesResearch Development - - - Selling General and Administrative 39,841 44,311 41,803 Non Recurring 4,686 - - Others - - -

Total Operating Expenses - - -

Operating Income or Loss -9,755 54,886 63,098

Income from Continuing OperationsTotal Other Income/Expenses Net 4,314 6,523 5,097 Earnings Before Interest And Taxes -5,441 61,409 68,195 Interest Expense - - - Income Before Tax -5,441 61,409 68,195 Income Tax Expense -8,225 19,845 23,451 Minority Interest - - -

Net Income From Continuing Ops 2,784 41,564 44,744

Non-recurring EventsDiscontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - -

Net Income 2,784 41,564 44,744 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares $2,784 $41,564 $44,744


PERIOD ENDING 30-Aug-08 25-Aug-07 26-Aug-06

AssetsCurrent Assets

Cash And Cash Equivalents 17,851 6,889 24,934 Short Term Investments 3,100 102,650 129,950 Net Receivables 27,619 42,972 29,926 Inventory 110,596 101,208 77,081 Other Current Assets 3,715 3,981 5,269

Total Current Assets 162,881 257,700 267,160 Long Term Investments 59,661 - - Property Plant and Equipment 40,097 51,389 56,907 Goodwill - - - Intangible Assets - - - Accumulated Amortization - - - Other Assets 15,954 37,565 35,646 Deferred Long Term Asset Charges 26,862 19,856 25,002 Total Assets 305,455 366,510 384,715

LiabilitiesCurrent Liabilities

Accounts Payable 35,202 65,866 80,122

Short/Current Long Term Debt - - -

Other Current Liabilities 19,131 22,971 - Total Current Liabilities 54,333 88,837 80,122 Long Term Debt - - - Other Liabilities 77,198 69,319 86,271 Deferred Long Term Liability Charges - - - Minority Interest - - - Negative Goodwill - - - Total Liabilities 131,531 158,156 166,393

Stockholders' Equity Misc Stocks Options Warrants - - - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 25,888 25,888 25,888 Retained Earnings 489,194 509,056 480,446 Treasury Stock -380,603 -366,326 -310,280Capital Surplus 29,632 28,646 22,268 Other Stockholder Equity 9,813 11,090 - Total Stockholder Equity 173,924 208,354 218,322 Net Tangible Assets $173,924 $208,354 $218,322


Assets Liabilities Income and earning

Current assets 257,700Current liabilities 88,837

Total Stockholder equity 208354

Inventory 3981 Total Debt 158156Profits before Interest and taxes 61409

Total assets 366510 Long-term debt 69319 Sales for current year 870152Finished Goods Inventory 3981

Cost of goods sold 770955

Sales for previous Year 864403

Fixed Assets 51389Earnings before Interest and taxes 61409

Annual Credit Sales 870152

Net Income for current year 41564

Accounts Receivable 30285

Net Income for previous Year 44744

Total Credit Sales 870152

Number of shares of common stock outstanding 31162

Market Price per share 26.85Earnings per share for Current year 1.32Earnings per share for previous year 1.37Dividends per share for Current Year 3,546Dividends per share for Previous year 3109

Total Interest Charges 6523


Liquidity Ratios

Current Ratio 2.90Quick Ratio 2.86

Leverage Ratios

Debt-to-Total Assets Ratio 0.43Debt-to-equity Ratio 0.76Long-term debt-to-equity Ratio 0.33Times-Interest-earned Ratio 9.41

Activity Ratios

Inventory Turns 218.58Fixed Assets Turnover 16.93Total Assets Turnover 2.37Accounts Receivable Turnover 28.73Average Collection Period 12.70

Profitability Ratios

Gross Profit margins 0.11Operating Profit Margin 0.07Net Profit Margin 0.05Return on Total Assets 0.11Return on Stockholders equity 0.20Earning per share 1.33Price-earnings Ratio 20.13

Growth Rations (yearly)

Sales 0.67%Net Income -7.11%Earnings per share -3.65%Dividends per share 14.06%


Strengths Weaknesses Opportunities Threats

1. Strong Brand1. Overdependence on US Market

1. Growing Demand for recreational Vehicles 1. High Fuel Prices

2. Leading Market Position (RV Industry)

2. Industry is affect by economic conditions and Per Capita disposable Income

2. Demand for Modular Homes

2. Intense Competition (Coachmen, Fleetwood)

3. R&D Facility (State of the Art)

3. Net Income decreased 7.1% in fiscal year 2007 3. Eco Friendly RVs 3. Seasonal Business

4. Producting Innovation

4. Only has 4 Facilities. All in Iowa. (Significant Distribution Expense) 4. International Market

4. Strict Federal and State Restrictions

5. Strong Financials5. Functional Organizational Structure

5. Target Market is expected to grow almost 4% until 2010 5. Economic Slowdown

6. Good Cash Reserve

6. Company Growth (Not taking advantage of low interest and their financial strength)

6. Increased Demand for high priced amenities and facilities. 6. Potential Liabilities

7. 13-Point Code of Ethics

7. Dealership Networks (Only 290 dealers in the US and a few in Canada)

7. 18-34 demographic is fastest growing 7. Interest Rates


SO Strategies WO Strategies ST Strategies WT Strategies1. Research and

Develop Eco-Friendly RV i.e. Hybrid Engines, BioFuel (S3, O3)

1. Market to Baby Boomers to increase

Net Income (W3, O5)

1. Create an RV that is specific for year round use. (S3, S4,

T3)1. Borrow Money to expand (W6, T6, T7)

2. Create new and improved amenities

(S4, O6)

2. Expand into the International Market

to decrease dependence on US consumers. (W1,

O4)

2. Donate to Charity to increase Brand

Strength and differentiate from

Competition (S1, T2)

2. Use Hybrid Technology to help

with High Fuel Prices and Increase

people's ability to use decreasing

disposable income. (W2, T3, T5)


Financial Strength rating is 1 (worst) to 6 (best) Ratings1 Return on Asset 4.02 Leverage 3.03 Earnings Per Share 2.04 Cash Reserves 5.05 Net Income Growth 3.06 Income/Employee 3.0

Industry Strength rating is 1 (worst) to 6 (best) FS Total 20.01 Growth Potential 5.02 Profit Potential 5.03 Financial Stability 6.04 Technolgoy Know-how 5.05 Ease of Entry into Market 3.06 Productivity, Cavacity Utilization 4.07 Resource Utilization 4.0

Environmental Stability rating is -1 (best) to -6 (worst) IS Total 32.01 Technological Changes -3.02 Rate of Inflation -3.03 Price Range of Competing Products -1.04 Barriers to Entry into Market -2.05 Competitive Pressure -6.06 Demand variability -3.07 Globalization -2.0

Competitive advantage rating is -1 (best) to -6 (worst) ES Total -20.01 Market Share -1.02 Product Quality -2.03 Product Life-Cycle -1.04 Customer Loyalty -2.05 Control over suppliers and distributors -2.06 Technological Know-How -2.0

CS total -10.0


FS+6

+1

+5+4+3

+2

-6

-5

-4

-3

-2

-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

CA IS

Conservative Aggressive

Defensive Competitive

38O’Malley, Ouellette, Plourde, Roy 2009


Alternative Strategies IE SPACE GRAND COUNT

Forward Integration X X 2

Backwards Integration X X 2

Horizontal Integration X X 2

Market Penetration X X 2

Market Development X X 2

Product Development X X 2

Concentric Diversification X X 2

Conglomerate Diversification X X 2

Horizontal Diversification X X 2

Joint Venture X 1

Retrenchment 0

Divestiture 0

Liquidation 0


Create Eco-Friendly Rvs Develop a "Towable" Segment Spend more on R&DKey factors Weight AS TAS AS TAS AS TASExternal 1 to 4 1 to 4 1 to 4 Growing Demand for Recreational Vehicles 0.08 4 0.32 3 0.24 4 0.32Demand for Modular Homes 0.06 0 0 0Eco-Friendly Rvs 0.07 4 0.28 2 0.14 3 0.21International Market 0.08 0 0 0Target Market is expected to grow almost 4%until 2010 0.07 4 0.28 4 0.28 4 0.28Increased demand for high priced amenities 0.06 3 0.18 2 0.12 3 0.1818-34 demographic is fastest growing 0.07 0 0 0High fuel prices 0.08 4 0.32 4 0.32 3 0.24Intense Competition (Coachmen, Fleetwood, Thor) 0.09 4 0.36 3 0.27 4 0.36Seasonal Business 0.09 0 0 0Strict Federal and State Restrictions 0.06 0 0 0Economic Slowdown 0.06 0 0 0Potential Liabilities 0.06 0 0 0Interest Rates 0.07 0 0 0 total should be 1.0 1 Internal 1 to 4 1 to 4 1 to 4 Strong Brand 0.1 4 0.4 4 0.4 3 0.3Leading Market Position (Class A & Class C Rvs) 0.09 4 0.36 3 0.27 4 0.36R&D Facility (State of the Art) 0.06 3 0.18 3 0.18 4 0.24Product Innovation 0.08 4 0.32 4 0.32 3 0.24Strong Financials 0.07 4 0.28 3 0.21 4 0.28Good Cash Reserves 0.08 3 0.24 3 0.24 4 0.3213-Point Code of Ethics 0.06 0 0 0Overdependence on US Market 0.07 0 0 0Industry is affected by economic conditions and Per Capita disposable income 0.07 2 0.14 2 0.14 1 0.07Net Income decreased 7.1% (2007) 0.06 0 0 0Only has 4 facilities. All located in Iowa. (significant distribution expenses) 0.06 1 0.06 1 0.06 4 0.24Functional Organizational Structure 0.06 0 0 0Company Growth (not taking advantage of financial strength) 0.07 0 0 0Dealership Networks (Only 290 dealers in US and a few in Canada) 0.07 0 0 0

total should be 1.0 1

3.72 3.19 3.64


1. Create a Towables Division to Meet the Needs of Low Budget Travelers $10,000,000

2. Develop Eco-Friendly RVs (Hybrids) $40,000,000

3. Enter New Markets (Europe, Australia) $50,000,000

4. Spend More Money on Research and Development $15,000,000

Total Cost $115,000,000

Retained Earnings 2007: $509,056,000


2007 Fleetwood Thor Industries

Revenue (Towables) $479,885,000 $565,524,000

Towables (units) 32,258 565,523

2008 Projection Winnebago

Revenue (Towables) $522,704,000


Vacationing in "caravans," as recreational vehicles are generally called abroad, is popular in Australia, New Zealand, and Europe, notably, in Germany, Switzerland, Austria, Scandinavia, and the United Kingdom.


Camper Trailer Caravan 5th Wheeler Motorhome

Number of Licensed Vehicles

5,733 42,401 117 7,546

%Change 2006 to 2007

24.14% 7.2% 44.4% 6.6%

RV Market Share

10.27% 76% .21% 13.52%


Scandinavia - Round TripDenmark - Round TripNorth Spain and The PyreneesSouth Spain - Madrid to Andalucia Belgium & The Netherlands West France - Britany , Normandy & French PyreneesAustria, Slovenia & North Italy Lakes & Alps - Switzerland & North Italy

Gas prices and narrow roads are the main issues in Europe.

http://www.motorhome-international.com/template/default.asp?PageId=25&parentId=331&catId=2&maincat=1









1. Maintain Market Share2. Decrease Production3. Focus on Inventory Reduction4. New Product Developments (Fuel Efficient

Products)5. Focus on the target market (Baby Boomers)6. Wait out the recession!


2008 Celebrated 50th year Anniversary Produced Class B ERA- 3rd Best Selling Manufacturer in Class B Revenue for 2008 Decreased 30.5% Net Income for 2008 Decrease 93% 2009- Fleetwood & Monaco filed for Ch.11 Protection in March due to the housing market meltdown


1. Determine whether you believe Winnebago should expand, diversify, make acquisitions, retrench, backward integrate, or establish more dealers to reverse the negative financial results of recent months and years.

2. Would manufactured housing (mobile homes) be an area that Winnebago should expand into now?


•http://www.winnebagoind.com/company/about-us/

•David, F (2009). Strategic Management. Pearson.

•http://www.winnebagoind.com/html/company/annreports/2007AnnualReport.pdf

•Business & Company Resource Center- Winnebago Industries Inc. Notable Corporate Chronologies. Online Edition. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.: Gale Group. 2009.http://galenet.galegroup.com.prxy6.ursus.maine.edu/servlet/BCRC

•Winnebago Industries, Inc.-http://www.winnebagoind.com/company

•Yahoo! Finance


•RV Investor- RV Stocks and Industry Newshttp://www.rvinvestor.com/Commentary%20and%20Analysis/2008_Mid_Year_Review_and_Outlook_20080604.htm

•Recreational Vehicle Industry Association- Vacation Costhttp://www.rvia.org/Content/NavigationMenu/MarketDataTrends/VacationCosts/default.htm

•GoRVing.com- Vacation Cost Analysishttp://www.gorving.com/pubs/Vacation_Cost_Anal.cfm

a strategic management case study matthew o’malley spenser ouellette kristi plourde robert roy

Documents

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