Management of Tektronix – Learning of the Case
Learning of the Case
Management of Tektronix was earlier concerned with the product costing and had no idea about the place where strategic emphasis was to be given. But then they came up with a new cost accounting system in which material overhead cost was computed from the part numbers in the instruments bill of materials.
This case analysis basically helps us to understand the relationship between the strategy and costing system. Also, it helps us to learn the behavioral consequences of the costing system. This case further emphasis on the fact that costing system can also be used to change the behavior of the employee.
Tektronix PID, Business Background
Tektronix was in portable oscilloscope business since fifties, but a real portable version did not exist until 1961. PID viewed itself as a product differentiator. Its strategy was to set the standards that competitors emulate. PID kept moving the references, their products, towards more functionality and performance for the dollar. Basically, PID was the state of the art technology with technology that uses unique components.
But the market scenario changed with the entrance of the Japanese in the market. In 1983, PID sales were less than $100 million with a return on operating assets of -20%. PID to protect market share, reduced the price matching with Japanese competitor. But these losses were obviously not acceptable in large run.
With analysis, the management found out no. of problems with the product line. For example, Inventory level was high and cycle time was 30 days. To reduce the prices, PID embarked on various improvement techniques like JIT, TQC and people involvement. With successful implementation of the above techniques, PID was able to reduce it cycle time to 10 days and reduce the work in progress significantly. After the successful transition of JIT process,