1. What has been Crowns competitive strategy?
At the time of Crowns entry into the mature market of industrial materials handling equipment, all its competitor firms had comparable technical capabilities and delivered similar functional performance. Rather than following a low cost-based strategy, Crown decided to use innovative design and attention to detail as its point of differentiation and a source of competitive advantage. The design of products not only addressed aesthetics but also operators safety & comfort thereby boosting operator productivity and reducing accidents.
Using this strategy, it entered product segments which lacked a better and preferred alternative and used its element of dominant design to command a 10% price premium for its products and capture sizable market share.
2. Evaluate the relationship between Crown Equipment and Richardson Smith.
The relationship between Crown and RS was based on mutual trust and shared passion for design. They both started out together and continued to share a long-term and mutually beneficial relationship wherein RS was Crowns exclusive partner to support all its new product development projects with industrial design expertise.
So much so that Crown did not employ any internal industrial designers as Crown was RSs key account and all RSs industrial designers who worked alongside the Crown engineering group were treated more as partners than external consultants. Although RS was a growing firm with increasing number of clients, RSs founder Dave Smith was intimately involved in almost all Crown projects. In contrast to other design consultants, RSs team of industrial designers played a crucial role right from product conception stage and together with Crowns engineers assess users needs, study competitors and develop prototypes involving multiple iterations.
3. From the perspective of Crown, what is the drawback of the relationship between Crown & RS?
Although Crown and RS have shared a long term professional partnership, they are still transacting as two external entities. The nature of transaction involves intangible assets like knowledge, ideas, skills and innovation that are much harder to contract and define property rights. Use of design as an element is a key source of competitive advantage for Crown and since it has outsourced this expertise, it leaves Crown in a vulnerable position as RS can threaten to walk away. In addition to assistance with new product development projects, RS also supported Crowns continuous improvement programs for existing products which made even minor product upgrades a lengthy process. As the competitive environment intensifies, Crown will need to shorten lead times for rolling out new products as well as upgrades on existing products. Another area of concern for Crown was RSs recent acquisition by Fitch which made it part of a much larger design consultancy. This would have a definite impact on RSs special relationship with Crown by increasing cost of consultancy services as well as timeline of projects.
4. Based on the evaluation, should this relationship be modified? If yes, how? If not, why not?
To protect its reputation for design consciousness and sustain its competitive advantage Crown should take the following steps
Create a small inhouse team of industrial designers that will support minor upgrades on existing product portfolios as well as small scale new product development projects
This will lead to better communication and tighter integration of engineering and design teams and reduce lead times
It will also help it retain some of the design intellectual property inhouse and discourage copycat firms
It should continue to leverage its relationship with Smith as long as hes a part of the Fitch consultancy group and use their expertise for key new product development projects for the US geography
As it looks to expand its geographic presence and enter new markets it should engage with new design consultants that have experience of working in geographies that are of strategic importance to Crown
It is also a good way to acquire local insights and adopt faster route to market processes
Both these actions will help it reduce dependency on RS consultancy and make it more self-sufficient in terms of design capabilities
In the long term as Crown grows in scale and scope it should look at acquiring an established design consultancy firm