Second Take on Ladyfishers Wonder Bread Feature

[Gandolf]

Hi All,

Ladyfishers article made me think about American industry in general. We have all seen old companies that used to do a great job go belly up.

A friend who is an MBA and I were discussing this a while back. He said that when he was working on his MBA degree, one of the things he was taught was that a company could lower the cost of making a particular product, by buying lower quality materials, etc., etc., and sell it for less, but overall sell more and ultimately make more money. He knew that this was a very bad teaching.

This does work....for a while. But what actually happens much of the time is that we consumers are not really all that stupid, and eventually we figure out the game. Sales go down on that particular product, one that we had purchased for years. The folks running the companies that do this seem to try all kinds of tricks to "increase market share", and "maximize profitability", everything it seems but go back to making the focus on a high quality product. They don't spend money to upgrade their manufacturing equipment over the years (to cut expenditures), they cut the size of their R&D staff (to cut expenditures), they make changes in their manufacturing process that "minimize the steps requiring highly skilled (read expensive) labor", they send more on "marketing", etc. They still "care" about quality and making an ideal product, but it isn't the main focus, and the design work of their experts often gets over ridden.

Reminds me of an article written years ago by the head of the MBA school at Harvard, the most prestigous business school in the world. The title of the article was "MBAs are ruining American industry", and all of the above, plus lack of technical expertise of the industries they were in charge of, focus on quarterly profit figures, etc., and other short term thinking were the reasons.

I worked at a company plant, years ago, that at one time was the most progressive in the industry, and at the time, state of the art. That plant and company (originally family owned) was bought by a conglomerate, and was the victim of much of the above...it is now closed. The path down hill is a very gradual slope, but it slowly happens over time.

Sad state, and fundamentally the problem is moral in nature. Often when conglomerates buy out old time family owned companies, this can happen.

There was an article on the history channel a while back on the history of coffee. They talked about the two main types of beans. One type, the aribica bean, is lower yielding, more labor intensive to grow, more difficult to grow, and grows in more difficult ground, but the quality and taste are great. The other type is higher yielding, has higher caffine, is less labor intensive, and grows in less difficult terrain (read that "it is cheaper to buy"), but it is more bitter and does not taste as good as coffee that is made from the aribica beans.

Well the old family owned coffee companies, the big brand names we all know, were all eventually sold to conglomerates, and over the years more and more of the cheaper beans were added to the name brands of coffee...all about price and profitability. Well, the program stated that "the consumers reacted predictably", and we now drink about 1/3rd (if I remember the program correctly) of the coffee that our parents and grandparents drank, per person. In the meantime, companies like Starbucks are going great guns, because they have stuck with the better coffee beans.

What about sporting goods? Just look at what happened to the Winchester model 12 and the model 70 back in the early 60s...it happens.

Lets hope that the companies that make the fly rods, lines, hooks, etc. don't go down that route. At least some of the conglomerates that own some of the sporting goods suppliers at least have outdoorsmen on their staffs...Lets hope for the best.

Regards,

Gandolf

[Joe Valencic]

A friend who is and MBA and I were discussing this a while back. He said that when he was working on his MBA degree, one of the things he was taught was that a company could lower the cost of making a particular product, by buying lower quality materials, etc., etc., and sell it for less, but overall sell more and ultimately make more money.

And the end result is that you go from having a reputation of making a fine product, down to becoming another run-of-the-mill company feeding garbage into the economy. The MBA's remove as many people from the process as possible (except themselves), and ultimately recommend the product be made overseas with inexpensive labor to reduce cost and increase profits (takes real genius to do that, doesn't it?). Why is it that the MBA's usually drive fine European automobiles, but deliver crap to the rest of us? The really sad part is that the academicians are feeding this garbage to the MBA students, and many of them have never spent a day working in a manufacturing plant.

I'm going to get off my pulpit before I get banged from this site for REALLY speaking my mind.

Joe

[Jonezee]

That's why I don't drink Lite-Beer. Why pay for something your not getting...like taste. The only reason regular Bud and Bud Lite are the same price is to make it easy on the consumer to make a decision...a no brainer as they say. If Bud Lite was .25cents a six pack less than regular Bud...they would sell less regular bud or maybe in time, none at all. Now the one that really gets me is milk. Why does skim milk cost the same as whole milk? Maybe the same as the Budweiser thing....???????