Prepared for:

Course: Production Management (MGT 314)

Instructor: Shaila Jahan Mona (JMS)

Section: 15

Prepared by:

Name ID

Seemin Masood 143 0627 630

Nusrat Hossain 141 1422 630

Mohammad Inquiyad Awal 133 0305 030

Mahmud Ali Sikdar 132 0719 030

Farah Shafique 131 0044 030

Date : 21.06.17
 AN AMERICAN TRAGEDY: HOW A GOOD COMPANY DIED
Case Study (Chapter 2)

1. Write a brief report that outlines the reasons (both internal and external) for
Burgmasters demise, and whether operations management played a significant role
in the demise.

A brief analysis of the case shows the following to be the probable reasons for Burgmasters
demise.
Internal factors:
Burgmaster had undergone through immense pressure after the LBO (leveraged buyout)
to generate cash. This is why they had to push their inventory as much as possible to
allow cash inflow, thereby resulting in defective items being sold to customers.
The LBO further refrained Burgmaster from reinvesting their profits which was crucial at
the time in order to cope with the competition.
In their attempt to bring in cash and cope with the competition, they also promised their
customers features which were not yet designed by the engineers.
Burgmaster, however, had operational problems way before the LBO. They lacked a
computerised system of management which is very essential for complex machine-tool
manufacturing.
Their supply management was in total disarray which further resulted in delays and cost
increases.
When the Burgmaster sold out to Houdaille in the hopes for expansion and in search for a
better formula, it turned out that nothing could actually replace the management
involvement on the shop floor. Burgmaster had only been profitable because they knew
the ins and outs of their business well.
External Factors:
Burgmasters failure can be equally attributed to the governments tax laws and
macroeconomic policies which were more inclined towards LBOs and speculation rather
 than productive investments at the time.
Other policies such as the Pentagon procurement policy put precedence on exotic
machines over standard, low-cost models, which also was to be blamed for the
companys downfall.
The industry itself was another player equally guilty for the downfall. When the industry
felt growing competition from imports, instead of reacting to it, they remained firm with
their conservatism. Therefore, when the situation demanded Burgmaster to restructure
their organization, they failed.

From the internal factors that led to Burgmasters demise, it is quite evident that the company
had several operational shortcomings which played a significant role in the demise. Moreover, as
discussed earlier, Burgmaster knew their business well, and therefore, their adeptness and
involvement in the operations worked for the company. Hence, the first grave mistake they made
was to completely sell out in the hopes of expanding with a new formula. When the existing
operations strategies provided inflows for Burgmaster, Houdaille was indeed wrong to adopt a
new formula instead of sticking to the one which worked best with their limited understanding of
the business. Moreover, after the LBO, the company failed to incorporate effective inventory
management and production management strategies, resulting in defective items. They also
failed to comply with and meet customer needs and wants, and therefore failed in the face of
competition. Their supply management was already poor to begin with, which only made things
worse after the LBO.

2. Do you think that inadequate strategic planning was a factor that resulted in the
companys asking for trade protection?

Yes, inadequate strategic planning can be said to be one of the factors which resulted in the
companys asking for trade protection and soon after demise.
The company's initial corporate strategy was to produce machines which were innovative and
offer flexibility to the customer. So the strategy was to differentiate their product based on
uniqueness and offering them the opportunity for customization to the machines. but due to the
lack of environmental scanning, poor responsiveness to threats and other external economic and
political factors, the company failed to last in the market. The company, it seems, lacked or
ignored the effective use of SWOT analysis, which is often regarded as the link between
organizational strategy and operations strategy.

Furthermore, Burgmaster failed to formulate the appropriate operation strategies that were
required to fulfill their corporate strategies of differentiation, innovation and flexibility to the
customers. When they were in need of investment in research and development for new and
improved products and services, along with new operations and supply processes to suit the new
products or services, they focused elsewhere. They adopted modern management techniques,
such as systems for computerizing production scheduling which were ill-executed and therefore
ineffective for the companys needs at the time.
There were no operations strategies in place based on the core competencies of the company to
achieve the corporate strategy while competitors operated with a low cost strategy and offered
cheaper products to meet the demand of the customers better than Burgmaster. While it is
important for every business to adopt an effective operations strategy, manufacturing is
specifically more in need of such. For Burgmaster, like any other manufacturing company, these
should have included inventory management and development of methods for measuring and
achieving productivity improvements.

The merger decision to form a conglomerate was strategic move on Burgmasters part, but when
they should have merged with a company that added value to their existing company and
supported current business operations, they chose to merge with a company based on its financial
merit and a supposedly better formula.

In the 1970s and early 1980s, operations strategy in the US was often neglected
in favor of marketing and financial strategies. That may have occurred because many chief
executive officers did not come from operations backgrounds and perhaps did not fully
appreciate the importance of the operations function (Stevenson: 12th edition). Management
involvement was also paramount for a business to be successful which Burgmaster was acutely
missing on the production floor. Moreover, the company overlooked non-financial indicators of
performance such as customers, internal business processes, and strategy performance
management tools like the Balanced Scorecard.

For Burgmaster to have been successful, a balance between financial resources, operational
capabilities, supplies and consumer needs needed to be struck early on. However, Burgmaster
failed to incorporate operations management principles which eventually led to the company
asking for trade protection and then its eventual demise.

3. Can you think of a strategy that could have increased Burgmasters chance of
survival? Explain why you think that strategy would have been effective.

The recommended strategy for the survival of Burgmaster could have been to adapt itself
according to the changing market trends in the economy.
If the up-to-date trends were to get automation in the business processes then Burgmaster had to
adopt this methodology for it to sustain in the market. The automation in business processes
would have reduced long term costs, improve business efficiency and thereby help achieve
economies of scale. The business productivity and efficiency would have improved as machines
have proved to be more effective and efficient than human beings; unlike humans, machines
require no breaks during work resulting in less delays. Even though, machines can malfunction
mid performance, those can be fixed and then worked for a good amount of time. Moreover,
automated systems require less supervision, thereby reducing costs.

Another strategic decision could have been to merge the company with another that was more
successful and adept in business operations. Through this, the business could have focused on
their sales - the most measurable goal for evaluating business performance, and thereby reclaim
their success in the market once again.