Business Administration

Lecture No. 3: Case studies on process analysis
1.What is a case study?
2.Organ Needle
3.Iwaya Porcelain
Takahiro Fujimoto
Department of Economics, The University of Tokyo

The figures, photos and moving images with ‡marks attached belong to their copyright holders. Reusing
or reproducing them is prohibited unless permission is obtained directly from such copyright holders.

1.What is a case study?
Research case (part of research, through data collection)
Teaching case (case for teaching material)
Analysis

Action planA study about cases is important, but making cases is more studious.

Case 1: Organ Needle(Ueda city, Nagano prefecture)

From Pamphlet of Organ Needle Co.,Ltd.

Case 1: Organ Needles (1)A medium-sized firm in Ueda city, Nagano prefecture (approx. 1000 employees)
Originated from a back-street factory making gramophone needles in downtown
Tokyo (Taisho Era)
Started manufacturing and sale of sewing machine needles in 1939
Evacuated Tokyo to Ueda city in midst of World War II
Became the world’s number one maker of sewing machine needles over 100
million pieces produced in 1960
Held 85% share of the domestic market in 1990s(Production of sewing machine
needles, in fact, constitutes a lump of know-how.)
But a demand for sewing-machine needles reached the ceiling. Growth bydiversification?

Company overview material of Organ Needle Co., Ltd.

From Pamphlet of Organ Needle Co.,Ltd.

From Pamphlet of Organ Needle Co.,Ltd.

Production Process

From Pamphlet of Organ Needle Co.,Ltd.

<Manufacturing Process of Sewing Machine Needles at Organ Needle, Co.,Ltd.>（材料） ： 鉄線をコイル状にしたもの
① 焼鈍
② 直線
③ 端削
④ 切断

： 材料を電気炉で焼くことによって内部のゆがみを除去する(焼きなまし)： コイルを伸ばして直線状にし、一定の長さに切断する⑫ 熱処理 ： 「焼き入れ→曲直→冷却→再加熱」というプロセスによって針の強度を増す⑬ 曲直： 針の曲がりをハンマーで叩いて直す： 線の両端を削って滑らかにする（この部分が針の先端となる)

⑭ 針揃

：

： 線を半分に切る（つまり②では2本分をまとめて切断している)⑮ 仕上研磨⑤ 伸線： 線を引っ張り出す⑥ 刻印： コード番号･社名等の刻印⑯ メッキ： メッキ前の研磨： 主にクロームメッキ（この工程は別会社で行っている)⑰ メッキ後研磨：⑦ 曲取： 曲がりを直す⑧ プレス ： プレスにより線をほぼ針の形にし、同時に張り穴をあける⑱ センサー選別 ：センサーにより「曲がり」「穴無し｣等の不要品を取り除く（不良品は前工程に戻す)⑲ 検査： センサーでは発見できない不良をヒトの目で検査： プレスのときにできたバリ(耳)を取る

⑳ 梱包

：

： 針の先端をとがらす（ここでほぼ完全な針の形状になる)

（出荷）

⑨ 溝切

： 針に溝を切って糸の通り道をつくる

⑩ 耳摺
⑪ 尖頭

ミシン針の工程

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

Transition家庭用ミシン針国内市場売上の推移(1985～1996）of domestic sewing machine needle domestic market sales (1985-1996)(×10000)

From Pamphlet of Organ Needle Co.,Ltd.

Case 1: Organ Needles (2)Courses of Diversification and Organization
First Product Division: Sewing machine needles (1954)
Second Product Division: Stocking needles for knitting machines
Third Product Division: Contact probes for continuity inspection ofsemiconductor, dot-wires fordot- printer heads, etc. --- all products in needle shape (1978)
Dealt based on customers’ request (needs’ pull)
Forth Product Division: Precision parts. Application of ultraprecision processing
technology
cultivated in manufacturing of needles (technology push) (1980s)

First ProductDiv.

Manufactures sewing machine needles, the firm's main product line,
having approx. 50% share of total sales. Relatively stablemarket andhigh profit rate. " Cash caw" division.

Second ProductDiv.

Manufactures stocking needles for kniting machines

Third ProductDiv.

Manufactures electronics equipment parts. Main products being contact
probes for continuity inspecion of semiconductor basis,etc., and dot wires
of printer heads for dot printers. Pillar of diversification with 20% shareof tatal sales.

Fourth ProductDiv.

Manufactures precision parts. Developed to date embrocation pinsand coil nozzles, etc.Straives to apply/exploit ultraprecision process
technologies accumulated by manufacturing needles.

Needs' Pullpassive diversification(Third Product Div.)○ Clear-cut needs, little risk
● Fierce market competition, requiring mobilityand stamina

Seeds' Pull

○ Maximize own technological advantage

positive diversification

Strong products possibly fostered(Fourth Product Div.)

Needs/Seeds in Balance(positive diversification)(passive diversification)● Big risk. If no needs, no success in the end.

◎ Leverage strengths of both Needs/Seeds models

Case 2: Iwaya Porcelain (1)Large pottery of Arita Wares in Arita machi, Saga prefecture (15generations over 270 yrs)
Medium-size company with 600 employees and ¥10 billion inrevenue
Diversified porcelain products, and a few factories in vicinity(1) Relief (single piece, customization, atelier style)(2) Vesela (large porcelain products, small-batch production)(3) Traditional porcelain (medium-batch production)(4) Tiles for buildings (large batch, tunnel oven)
Taking time to diversify gradually (acid-resistantporcelain→tile→relief)

Production Process: Traditional Porcelain (teacups, etc.)

Case 2: Iwaya Porcelain (2)Competitiveness of Iwaya Porcelain products: Arita Wares’ brand power,
quality
Conventionally, mass-produced acid-resistant porcelains were the moneymaker(monopoly of material)
But, the profitability of Tile Business, the largest (50%) in the firm, has beensluggish for a long time.
Inferior to Seto and Tajimi in terms of scale, cost, transportation cost, etc.
Hence a strategy for 1990s-----“General Special Order Porcelain Maker”
Slogan: “from receiving orders to creating orders”
Can the Tile sector reproduce the Relief Business’s precedent of increasing its
profit?

Analysis: Big sectors are Tile and Acid-resistant Porcelain (chemical).
Growing sectors are Vesela, Traditional Porcelain, Tile.
Profitable sectors are Relief, Vesela, and Acid-resistant Porcelain (chemical)
Comparison of Major Businesses (2) : General Indicators
ReliefVesela

Traditional
Porcelain

Tile

Chemical-industry
related

Revenue (1980)(¥million)

304

300

717

2800

2200

Revenue (1990)(¥million)

450

500

1670

4800

2700

Growth in revenue(1990/1980)

+48%

＋57％

＋133％

＋71％

+23%

2%

3%

6%*

Operating margin(1980)-10%

Operating margin(1990)

11％

11％7%

7%

9％**

No. of employees(1990)

385060270116

Notes: * Includes FRP and Construction sectors (both in deficit)** Excludes FRP and Construction sectors (both in deficit)

Tile business sector is big.
Table 1 Transition of Revenue and Number of Employees of ⅠCompany
Fiscal Year （April-March）

1983

1984

1985

1986

1987

1988

1989

1990

Revenue (in ¥000million)

75

74

74

74

71

69

83

97

47%

42%

32%

36%

30%

27%

25%

28%

3%

3%

Chemical-industry related(acid-resistant)
FRP (fiber reinforcedplastic)
Revenuecomposition (%)

Construction (engineering)

10%

9%

9%

8%

10%

11%

Tiles for building exterior

43%

50%

49%

46%

52%

54%

52%

49%

Relief (wall painting) +Vesela (outdoor objet d'art)

9%

8%

9%

10%

10%

11%

10%

9%

Number of employees(head count)

575

562

571

597

592

581

581

626

Average age (yr. of age)

41

41

42

41

42

4242

41

Average years of sevice (yr.)

151615

14

15

15

15

14

Information: Company's sales reportComparison of Major Business Sectors (1-1): Product, Market, Competitiveness--- Tile business is not strong.
Relief

VeselaTraditional
Porcelain

Tile

Chemical-industry
relatedTime of business
commencement

１９６０s

１９７０s

１８th century

１９５０s

１９２０s

Product outline

Interior of public buildings
Porcelain for wall decoration
Wall painting of tiles(average size at 3x7m)

Umbrella stands
Ash tray stands
ChairsFlowerpots, etc.
Outdoor objects d'artof porcelain

Porcelainvases Dishes
Whiskeybottles
Accessories,etc.

Porcelain tiles foroutdoor decorationof commercial
bldg (includingconstruction)

Acid-resistantporcelain bricks,
balls, saddles, etc.
Filers for chemicalplants, etc.

Major customers

Public offices
Design offices

Furniture retailers
Furniture whole sellers
Design offices
Department stores

Individuals
Public offices
Liquor makers,etc.

Public offices
Bldg owners
Design offices

Chemical makers
Filature makers
Iron makers
Power companies

Major attributes
required forproducts

Artistic quality
Weather resistance

Aesthetic
Weather resistance

Aesthetic

Aesthetic
Precision
Durability
Weather resistanceCorrosion resistance
Thermal insulation
Abrasion resistancePrice elasticity

Low

Low

MediumHigh

０．１％

２％ (tile market)
１０％（commercial bldg
market only）

８０％

IX Co. (tile sales at¥72bill. in 1985)
DT Co. (tile sales at¥17bill. in 1985)

NG Co. (Japan)
DW Co. (USA)ST Co. (Germany)

ⅠCo.'s share ofdomestic porcelain
products' market
Major competitors indomestic porcelain
products' market

８０％

OT Co.
Individuals

Low

８０％

Shigarakiyaki makers

ManyComparison of Major Business Sectors (1-2): Product, Market,
Competitiveness:ⅠCo’s tiles are customized-orders, but costs are high.

Color

Technology inlarge porcelain
Manufacturing
technology

Technology inlarge porcelain

Special-order
items
TextureDurability

Capability in material
procuremet Engineering
capability in heat-resistantsystemⅠCo's strength v.s.
competitors

Past actual results
Carving technology

ⅠCo's weakness
v.s. competitors

Handling of segementing tolarge number oftilesHeavy weight
Fragility

High colst

High cost

High cost (compared toforeign products)

Main competitive
substitutes

No wall decoration

Porcelain
WaterPlastics

Porcelain

Porcelain tiles
Stone
Metal

FRP (fiber reinforcedplastics)
Metal(titanium, etc.)

Share of porcelain
products' in toalmarket including
substitues

10%

15%

n.a.

60%

Corrosion resistance
Thermo resistanceAbrasion resistanceInexpensive (v.s. titanium)

Heavy in weight
Fragility
Inexpensive (v.s. titanium)

Strength ofporcelain products
v.s. substitues

Durability AttractivenessSuperior colorWeatherresistance
AttractivenessSuperior color

Durability

Weather
resitance
Durability

Weakness ofporcelain products
v.s. substitues

Handling of segementing tolarge number of tiles

Heavy in weight
Fragility

nothing
particularHigh cost50%

With a brand as customized-order products, canⅠCo. compete against Seto and Tajimi?
Comparison of Major Businesses (4): Devlopment and Sales
Relief

VeselaTraditional Porcelain

Tile

Chemical-related
products

No. of productengineers

００

n.a.

４７

No. of indutrial
designers

６５n.a.

３０

No. of productionengineers

１１

６０１０

Lead time for trial
manufacturing

１５ days

１５-３０ days

３０ days２０ days７-９０ days

In-house producton
rate of facility tools

９０％

５０％

３０％

０％

１０％

No. of personnel forsales

８１６９２５１２

Main sales methods

Order entry thru word ofmouth
Direct mails

Route sales via
wholesalers
Presentation ofcustomized orders

In stores
Direct mails

Special orders as
per customers'
specifications

Joint developmentwith customers
Direct mails

Sales personnel's' levelon product technology(self evaluation)(target = 100%)

８０７０１００

５０８０

Share of customizedorders (new design)１００％

Low （３０％）

High （８０％）

Highn.a.

But the company is not profitable at all.

Case 2: Iwaya Porcelain (4)New management team wants to concentrate on customized products of added value
initiated from proposition-oriented business.
But there still exists within the firm a strong “belief in standardized products undermass production” derived from the past successful experiences in the acid-resistantporcelains (standardized/average products of mass production).
Such an idea exists at the factory’s floor in the form of a “belief in the tunnel pot”.
There is a gap between the top management’s strategy on customized products andthe production floor’s orientation to mass production.
Strategic framework needs to be established after incorporating Mono-Zukuri sites.

Case 2: Iwaya Porcelain (4)What is a reformation of Mono-Zukuri sites which is linked to the customizedproduct strategy?
Improvement on a layout change of the tunnel pot? --- limited
Computer-controlled flexible automation? ---questionable return on investment
Switch from the tunnel pot over to the shuttle pot? --- its pros and cons?
Establish a line exclusive to trial products? --- (problem of postponing trials)
How can the factory-network structure become stronger?
Should designers and engineers be dispersed in factories/branches?

More like, products deserving high prices potentially exist in a small-lot-order zone?

Order lot size and unit price of tile

Tile of special shape
Tile of standard type1999 / 3

SWOT Analysis (by Business Sector) Tile’s Characteristics?
ReliefLow effct ofbusiness cycle

VeselaTraditional
porcelain

Tile

Chemical-industry
relatedStrengthWeakness
technology of 3-D Relief slow progress
80% sharein prodution tech.
labor-intensive
business
proprietry genre

Functiondiversification/
gentrificationin line with top's
policyin line with top's
policy80% shareknow-how of large-size
production
first entry in inland
new design concept
many competitors
gentrification
production technology high cost (remote(lifestyle)for large-size porcelain areas)
leadership by VP
seasonal fluctuation/high morale of sales force high effct of business cycle
revived quality
high costhigh-grade orienresponsive to client
low share
taion
inadeqate sortingsytem
cost accounting tomatch small-lot
production

Issue
linckage withother sectors
efficiency ofsales personnel
low increase inprroductivity

fostering futurecraftmen

resistance to responding
to small-lot/-quanity
production
no production engineer
in deficit-inclinationhigh effect of businesscycle

Action Plan (Company Strategies/Policies)
1.Concentrate on production of customized orders < GeneralSpecial Order Porcelain Maker>
2.Transform from receiving orders to creating orders (toProposition-Oriented Business)<Prioritize Customer Satisfaction>

Tile Business Strategies

Proposition onEnvironmentAction Plan (Factory Structure)
T Pot

Tile

Arita Head
Kami Arita Nishi Arita
Office Factory
factoryfactory
larg-size tileImariFactory

Yamanouchi Yamanouchi Yamanouchi
1st Factory 2nd Factory 3rd Factorysmall-size tile

Chemicalindus-related
Traditional
porcelain
VeselaRelief
FRP
material
TunnelShuttleshintai*
1

4*shintai: an object of worship housed in a Shinto shrine and believed to contain the spirit of a deity.

Bu-kanren
Factory
standardized tile

Action Plan (Factory Structure)
1.Set up a structure for trial productions (R&D)
Currently, trial items are being produced in a regular production line,thus delayed.
→ Introduce facilities for an exclusive use of trials (Shuttle) for development
research→ Experiment on the shuttle at the chemical-related business sector
2.Full-fledged production structure (consolidation of factories)
Scattered Chemical-related business →Integrate at the head office(goshintai)
Large-size Tile business at head office → Yamanouchi 1st Factory
Discontinue FRP and sell out factory → FRP tank makerSell out Kami Arita Relief factory → Transfer to Yamanouchi 1st (Shuttle)Add new Shuttle pot(s)Action Plan (Reorganization)
President
Management/RD

Planning Office
ProductionTechnology
Environment
Proposition Division

Chemical-industry-related
Products DivisionMarketing Department
Tile

VeselaReliefDurability

Traditional Porcelain
Division

Marketing Department
Construction

Ceramic

Marketing Department