ASSIGNMENT ON MANAGEMENT ACCOUNTING
TOPIC- INDUSTRIAL GRINDERS N.V. CASE
ABHISHEK PRATAP SINGH-/1
QUESTION-WHAT ACTION SHOULD BRIDGEMAN TAKE? WHY?
In this case, defining the problem is very important. The problem is that French firm Henri Poulenc produces a plastic ring to substitute from the steel rings used in certain machines sold by Industrial Grinders and this plastic ring is a new product to market. It has longer life but lower cost. Now Bridgeman’s problem is I.G’s large quantity of steel rings are on hand and the substantial inventory of special steel for their manufacture. And this steel as inventory can’t be sold. I.G had
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It could cut down the cost and improve the quality of rings. If I.G switches from steel rings to plastic rings successfully, it could expand business and get more profits because of low cost, so it’s an opportunity. However, the competitor had plastic rings in advance than I.G, so it’s threaten for I.G. Competitor could use this advantage to get more business. It maybe threat to I.G’s operation and profits. In the early 1970, Japanese manufacturers had successfully entered the field with low priced spare parts. Other companies also had appeared with low quality and lower price machines. The competition would become more intense. More competitors share one market, so each supplier needs to improve competitiveness. It’s a new challenge. After analyzing internal and external situation of I.G, we can say that I.G has strong operational capacity. However, the core problem is what to be done about the steel inventory. I.G should start developing plastic rings as soon as possible and start using those. Because the core of competition is production, even though steel ring still has its value now, the plastic ring will substitute for it sooner or later. The strong competitor of I.G is Henri Poulenc. It has already introduced plastic rings. Only if I.G produces plastic ring in time it can compete with Henri Poulenc and stop them from grasping more market share. In addition, plastic ring has lower cost and longer life than