Strategy and Product Desing at Regal Marine

Strategy is the action plan to achieve a company’s mission. The firm’s mission is then supported by each activity. Each activity, including the production activity has a strategy for achieving its mission and for helping the organization reach the overall mission. These strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses. In this case we explore how strategies are developed and implemented at Regal Marine.

Firms achieve missions in three ways:

1. differentiation
2. cost leadership
3. quick response.

This means operations managers are called on to deliver goods and services that are

1. better, or at least different
2. cheaper
3. more responsive.

Regal Marine, one of the US’s ten largest powerboat manufacturers, achieves its mission — providing luxury performance boats to customers worldwide — using the strategy of differentiation. It differentiates its products through constant innovation, unique features, and high quality. Increasing sales at the Orlando, Florida, family-owned firm suggests that the strategy is working.

Differentiation goes beyond physical characteristics to encompass everything about the boat that influences the value that the customers derive from it. Operations managers at Regal assist in defining everything about their boats that will influence the potential value to the customer. This may be the convenience of a broad product line, product features, or product service.

Product service can manifest itself through convenience, training, boat delivery, or maintenance services.

As a quality boat manufacturer, Regal Marine starts with continuous innovation, as reflected in computer aided design, high-quality molds, and close tolerances that are controlled through both defect charts and rigorous visual inspection. In-house quality is not enough, however. Because a product is only as good as the parts put into it, Regal has established close ties with a large number of its suppliers to ensure both flexibility and perfect parts.

With the help of these suppliers, Regal can profitably produce a product line of 22 boats, ranging from the $11,000 3-passenger Rush to the $250,000 40-foot Commodore Yacht. “We build boats,” says VP Tim Kuck, “but we’re really in the ‘fun’ business. Our competition includes not only 300 other boat, canoe, and yacht manufacturers in our $17 billion industry, but home theaters, the Internet, and all kinds of alternative family entertainment.

” Fortunately for Regal, with the strong economy and the repeal of the boat luxury tax on its side, it has been paying down debt and increasing market share.

Regal has also joined with scores of other independent boat makers in the American Boat Builders Association. Through economics of sale in procurement, Regal is able to navigate against billion-dollar competitor Brunswick. Global firms like Regal Marine know that the basis for an organization’s existence is the good or service it provides society. Great products are the keys to success. With hundreds of competitors in the boat business, Regal Marine must work to differentiate itself from the flock.

Regal continuously introduces innovative, high-quality new boats.

Its differentiation strategy is currently reflected in a product line consisting of 22 models. But why must Regal Marine constantly worry about designing new boats? The answer is that every product has a life cycle. Products are born. They live and they die. As the figure below shows, a product’s life cycle can be divided into four phases: introduction, growth, maturity, and decline.

The Figure below shows the four life cycle stages and the relationship of product sales, costs, and profit over the life cycle of a product. When Regal is developing a new model boat, it typically has a negative cash flow.

If the boat is successful, those losses may be recovered and yield a profit prior to its decline. The life cycle for a successful Regal boat is three to five years. To maintain this stream of innovative new products, Regal constantly seeks design input from customers, dealers, and consultants.

Design ideas rapidly find themselves in Regal’s styling studio, where Computer Aided Design technology speeds the development process. A Regal design engineer can start with a rough sketch or even just an idea and use the graphic display power of CAD as a drafting board to construct the geometry of the new boat.

The CAD system helps the designer determine engineering data such as the strength, dimensions, or weight. It also allows the designer to be sure all parts will fit together. Existing boat designs are always evolving as the company tries to stay stylish and competitive. Moreover, with life cycles so short, a steady stream of new products is required.

A few years ago, the new product was the 3passenger $11,000 Rush, a small, but powerful boat capable of pulling a waterskier. The next year, it was a 20-foot inboard-outboard performance boat with so many innovations that it won prize after prize in the industry.

Then it was a redesigned 42-foot Commodore that sleeps six in luxury staterooms. With all these models and innovations, Regal designers and production personnel are under pressure to respond quickly. By getting key suppliers on board early and urging them to participate at the design stage, Regal improves both innovations and quality while speeding product development. Regal finds that the sooner it brings suppliers on board, the faster it can bring new boats to the market.

The first stage in actual production is the creation of the “plug,” a foam-based carving used to make the molds for fiberglass hulls and decks. Specifications from the CAD system drive the carving process. Once the plug is carved, the permanent molds for each new hull and deck design are formed. Molds take about 4-8 weeks to make and are all handmade. Similar molds are made for many of the other features in Regal boats–from galley and stateroom components to lavatories and steps.

Finished molds can be joined and used to make thousands of boats.

Discussion Questions

1. State Regal Marine’s mission in your own words.
2. Identify the strengths, weaknesses, opportunities, and threats that are relevant to the strategy of Regal Marine.
3. How would you define Regal’s strategy? How is it better than its competitors? What is its competitive advantage?
4. How does the concept of product life cycle apply to Regal Marine products? What are the strategies in each of the stages of the life cycle?
5. What strategy does Regal use to stay competitive?
6. What kind of engineering savings is Regal achieving by using CAD technology rather than traditional drafting techniques?