Reference no: EM13896342

Trail Frames Chassis

Trail Frames Chassis (TFC) of Elkhart, Indiana, is a major manufacturer of chassis for the motor home and van markets. Since it was founded in 1976 by two unemployed truck-manufacturing engineers, TFC has grown into one of the major suppliers in this market. Success in the motor home and van markets is difficult because of the constant rate of change taking place. Increasingly, motor homes and vans are bought by people in their late 40s to 60s. What these people want is a motor home that rides like a car. They are willing to pay for innovations such as ABS (antilock breaking systems), assisted steering, GPS, voice- activated control, and computer-balanced suspension. TFC produces a pusher type of chassis. This is one powered by a diesel engine in which the engine is located in the rear. While expensive to build, this design offers the customer a large number of advantages (no tunnel for the transmission, reduced engine noise, better handling). However, these chassis are used in motor homes that are very expensive ($150,000 and up). TFC builds its chassis for the large man- ufacturers-companies such as Winnebago, Airstream, and Gulf Stream. In general, these companies place orders for small quantities (5 to 10 in a batch). Many of the units in a batch are customized to a specific customer's requirements. TFC has become successful because of its ability to develop new lines of designs in a timely fashion. These designs build on TFC's extensive experience with motor home users. They also build on TFC's knowledge of new technological advances and its ability to incorporate these advances into its designs. As a result, TFC has become the technological leader in this market. It is generally recognized that no one in the industry can match TFC's design and marketing knowledge base.

TFC is proud of its ability to design and build highly customized chassis. As John Stickley, its young and aggres- sive chief operating officer, is proud of pointing out, "Trail Frames has never met a customized chassis it didn't like." Complementing this focus on customization and speed, TFC has developed a culture of doing anything necessary to meet the needs of the customer. Changes are often introduced on the fly with an engineer taking a change down to the assembly line. In many cases, the bills of materials (the recipes for what goes into a given chassis) that were gener- ated initially in engineering do not agree with the compo- nents and parts actually put into the chassis.

This approach has served TFC well for a number of years. However, recently sales for TFC have begun to level off. After visiting numerous customers in the field, John Stickley identified what he thought was the reason for this leveling off-the market for high-end, customized motor home chassis had been effectively saturated. There were only just so many customized motor homes that peo- ple wanted. Several of the major customers for TFC had strongly hinted that there was another market that TFC could enter that was consistent with its design strengths and its reputation.

Many of TFC's customers had noticed that there was a significant gap between the high-end motor homes that TFC served and the low-end market. The high-end consisted primarily of "pushers," and it began at $150,000; the low-end consisted of "pullers," and these products sold for between $35,000 and $70,000. That is, a motor home manufacturer would take an existing truck body (which consisted of the front end and the cab) and mount on it a motor home body. As can be seen, there was a significant gap between the two markets.

One of TFC's major customers, Gulf Stream, approached TFC with an interesting proposal. It wanted TFC to design and build a low-end pusher chassis for this market. This chassis would go into a motor home that would cost between $75,000 and $90,000. In contrast to the current line of products, this chassis would not be cus- tomized. Rather, once the chassis was designed, it would not be changed. Production runs would go up from batches of five to batch runs of 100. Critical to success in this market would be cost and conformance to the schedule. If TFC could be the first to produce such a chassis, it would own the market. The financials were very attractive. Theoretically, it seemed easy for TFC to enter this market. All that had to be done was to take an existing chassis and to take out the "costs" by using less-expensive components. While TFC had never built such a chassis, there was no reason why it should not work. The only danger that the people at TFC could identify was that once it entered this market, it would be potentially competing with such firms as Ford, GM, and Toyota (major suppliers of the existing chassis). However, these firms supplied pullers (a chassis with the engine in front)-not pushers, like the proposed TFC product. In light of these issues, John was not sure whether this was the right market for TFC.

Questions

1. Compare the order winners, order qualifiers, and order losers for the customized chassis and for the proposed TFC chassis. To what extent are these factors similar?

2. What type of strategic consistency would you expect to find in TFC for its existing customized chassis? Would this be the same type of consistency that you would find with the proposed chassis?

3. Evaluate the proposal for this new line of chassis. Is this a business that TFC should get into? If yes, why? If no, why not?

4. What would you recommend to John Stickley that TFC should do to increase its sales and to stimulate demand?