Management
Executone Information Systems, based in Milord, Connecticut, which designed and marketed telecommunications products for small-and medium-sized businesses, has become a major telecommunication company competing with AT&T and Northern Telecom since 1988. Because of economic recession in 1993, many companies had to change their product strategy to overcome this unbreakable situation. Not only the largest company in this business area such as AT&T decided to lower price and revenues, but also Executone reduced its profit margin since it had recently overhauled healthcare communication system that was malfunctioning after installation. With this current situation, even though Executone showed slightly incremental Return On Sale from 0.4% in 1991 to 1.2% in 1992 in its Annual Report, this was not yet its great appreciation. After facing this crisis, Alan Kessman, the president of Executone Information Systems, questions its future business that it would be able to conquer with its rivals in the market. To achieve the highest degree of success in this industry, Kessman wonders whether any mid-course adjustment should be implemented. 1. Continuing every product with more advertisement and introduci
Therefore, with dropping these products, the company could lose much money, which potentially impact to return on sales, -0. Reducing product line by dropping non-system telephone products looks like another good alternative for Executone since these items had a positively high cost of good sold and did not generate a large amount of return for investors. To complicate the matter, the company might not have enough money to invest in any sales or marketing strategies because its income before taxes was practically small. Therefore, the critical issue at this time was operating decision that could control cost of good sold, sales, general, and administrative expenses (SG&A), as well as other expenses, not promotion strategy. In another words, the company should consider whether it was worthwhile to trade-off some revenue from healthcare system with its creditability and reputation in this industry. Second, Porter declares, "A company can outperform rivals only if it can establish a different that it can preserve" (qtd. Moreover, because the company spent a half of the total R&D expenses on healthcare system at that time, this process could significantly reduce R&D, SG&A expenses, resulting in higher return on sales from 1. With adopting its strategy, the company could gain more sales, resulting in increase in return on investors. With dropping its healthcare system, the company also could have an extra resource that used to be responsible for those tasks that could use in other portions. Dropping healthcare system and making some changes in its organizationu Analysis of each optionContinuing every product line on the market by putting more advertisement and introducing promotion campaigns is not the best solution in helping Executone to become successful in this situation since there were some flaws from this approach. Capitalizing on competitors' weaknesses is another essential approach.
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