What are the main points of this case? SEXe1232- 3-Machine Toolsresearch and the country organizations worked to develop and apply newproduction methods. Moto employed the company's own equipment, such asnumerical controls and minicomputers, and had developed unique software andautomation techniques.584-074THE NUMERICAL CONTROL INDUSTRYMachine tools were power-driven equipment for shaping metal,either by cutting (over 80%) or forming. They were made primarily inEurope, the U.S. and Japan by original equipment manufacturers (OEMs) whotook great pride in machine precision and reliability. West Germanyaccounted for 40% of machine tools made in Europe.OEMS sold to end users, ranging from large, sophisticatedaircraft and automotive manufacturers, that shaped metal parts on assemblylines to "job shops" that fabricated workpieces in small batches or singleunits. Until the introduction of NCs, all machine tools were controlledmanually by highly skilled operators who followed a pattern drawn by adesign engineer. The operator used dials and handles to move the workpieceand tool.Numerical ControlsNCs were devices that, following a program, electronicallydirected the movements of the workpiece and tools, freeing the operatorfrom manual control. Early NCs were programmed through a paper tape, onwhich a production engineer punched a program using special tape writingmachines. The operator installed the proper tool (such as a drill bit),secured the workpiece, and then fed the tape through the NC.These early NCs doubled the capacity of a machine tool, ensuredthat all pieces met the same precise specifications, and increased laborproductivity; however, they were expensive, needed engineers who knew howto develop the programs, and required trained operators. During the 1950sand 1960s few machine tools were numerically controlled. The few end userstended to be large innovative manufacturers. U.S. defense contractors, inparticular, were compelled to use them, by the insistence of the U.S. AirForce. NC demand did not grow widely until the mid-1970s, when techno-logical innovations lowered costs and improved performance.Technological AdvancesThe key technological advance was the computerization of NCsenabling the writing and storage of "software." Software was a general.program which an NC programmer used to write specific "workpiece programs"that were different but of the same general form. Early computerized NCsused minicomputers and were expensive, but in the mid-1970s the micro-computer allowed costs to drop and capacity and reliability to increase.By 1983 only a few minicomputer NCs were still produced; Moto made onlymicrocomputer NCS.584-074As NC computer hardware grew in capacity, software was developedto handle more complex and precise machine tool functions. Although someNC manufacturers licensed third party software houses, most wrote their ownsoftware for their units, and the writing of software grew to dominatedevelopment efforts. In 1982, 80% of ICD's NC development cost was forsoftware; development, in turn, accounted for 30% of total NC costs. ICDworked closely with its largest customers on software; but like othermakers, it used knowledge obtained from all its customers to developsoftware that could handle increasingly numerous and complex machine tool.functions. By 1983, software could automatically compensate tool speed fortool wear, increasing the "up time" of the machine. New "user friendly"software allowed machine tool operators to program a workpiece or batch,often in only a few minutes, without the help of a computer programmer.New software also enhanced the precision and quality of the workpieces.OEMS were developing machine tools that performed new and moresophisticated functions. A major advance was the introduction of machiningcenters, greatly expanded machine tools with multiple tools thatautomatically changed tools according to an NC program. These new toolsnecessitated more powerful NCs and new software. Moto made an NC that hadcapacity and software to control a machining center with up to 5 axes, 32tools, high power functions, and close tolerance.The early NC machine tools could not easily interface with othermachinery or outside operations. In the mid-1970s, programmablecontrollers (PCs) were developed. PCs were integrated with an NC andprovided data and signals to link the machine tool to other equipment. ICDmarketed a line of PCs separately from its NCs, because many OEMs boughtNCs and PCs from different suppliers. A PC required its own software, andthe PC's capacity and software determined how complex the interface betweenthe machine tool and other automated equipment could be.The first important use of PCs was loading and unloading.Conveyor belts moved a batch of workpieces one by one to be securedautomatically to the machine tool. The PC signaled the belt to move; aseach successive workpiece was secured, the PC checked alignment andsignaled the NC to start the program again. An operator could load a batch.of workpieces and let the machine tool run, tremendously enhancingproductivity.Although these advances made NC machine tools applicable to moreend-user operations and demand grew, in 1983 many end users still foundthat the programs did not adequately solve their manufacturing problems.Motofabrikwerk's RoleMoto entered the NC business in 1962 and worked only withEuropean machine tool OEMS. European OEMs, numbering less than 500 withsome building only a few specialized machines a year, proved reluctant toadopt NCs. Moto soon became the third largest NC vendor in Europe, behindSiemens and Philips. Siemens, based in Munich, gained the dominant sharein West Germany. In 1983, Moto sold to 21 European OEMs, only 6 of whombought more than 50 units in 1982. Some machine tool builders, such as 123DOZHarvard Business SchoolMOTOFABRIKWERK S.A. (A)9-584-074Rev. 6/85In August 1983, Mr. Hans Overmeyer, marketing vice president ofthe Industrial Controls Division (ICD) of Motofabrikwerk S.A. in Zurich,Switzerland, was reviewing his numerical control business. Numericalcontrols (NCs) were computerized devices which directed machine tools.Motofabrikwerk (Moto) sold NCs to machine tool builders who soldnumerically controlled machine tools to diverse end users.Moto entered the NC business in 1962 and by 1983 was the thirdlargest merchant supplier of NCs in Europe. ICD, however, reported a loss.of 5% of sales in 1982 and again for the first six months of 1983.Overmeyer attributed the losses to the sharp drop in worldwide demand formachine tools, caused by the most severe recession since the 1930s, and tointensifying competition. ICD faced both steeply declining competitiveprices and substantial expenses for continuing research and development.Overmeyer had to submit the 1984 development budget in earlySeptember and wondered whether the $3 million needed to maintain thebusiness could be justified. Some experts considered the prospects of theNC business as potentially enormous and others saw it offering a majorentry into the "factory of the future." Moto, with a strong position inelectronic equipment and internal expertise in manufacturing automation,was among the few European concerns along with Siemens, Philips,Olivetti, and ASEA- which might have the resources and knowledge tocompete effectively in the emerging factory automation business.MOTOFABRIKWERKMoto reported 1982 revenues of SFr. 19.4 billion ($9.7 billion), ¹profits of SFr. 440 million ($220 million), assets of SFr. 20.3 billion($10.15 billion), and a solid balance sheet.In 1982, the Swiss franc (SFr.) exchanged for approximately $.50.This case was prepared by Research Assistant Edward J. Hoff, under thesupervision of Professor Benson P. Shapiro as the basis for classdiscussion rather than to illustrate either effective or ineffectivehandling of an administrative situation. Assistant Professor Frank V.Cespedes provided substantial editorial support.Copyright © 1984 by the President and Fellows of Harvard CollegemeansNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meelectronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.Distributed by HBS Case Services, Harvard Business School, Boston, MA 02163. Printed in U.S.A.584-074History- 2-584-074Two Swiss engineers founded Moto in 1902 to manufacture electricmotors for street cars and other machinery. In 1908, the company beganmanufacturing internal combustion engines for European automobile and truck.assemblers. After World War I, the company began producing electricgenerators, electrical parts such as starters for automobiles, andelectromechanical controls such as governors for electric motors.OrganizationAfter World War II, Moto again grew rapidly. Management used.knowledge gained from the electromechanical control business and extensiveR&D efforts to launch three additional major product lines: 1)sophisticated electronic testing and measuring instruments, such asadvanced volt and current meters, 2) products that controlled certainmanufacturing operations, including numerical controls, and 3) integratedcircuits and minicomputers, introduced in 1969.Moto's organization had evolved into a matrix, with both productdivisions and country organizations, and with profit and revenue figureskept by each structure. In 1983, Moto had 7 product divisions, each run bya general manager. (Exhibit 1 lists the divisions and their 1982revenues.) The 29 country organizations, each run by a country manager,had responsibility for sales, manufacturing, and administration for allMoto products sold or made in that country. Europe accounted for 65% oftotal revenues, and the U.S. for 22%.Each product line sales force was organized by country andreported through the country organizations. The marketing and productdevelopment staff reported through the product divisions. The sales forceworked with the product division staff to adapt product to a particularcountry's needs. Division management had to work with the management ineach country to introduce a new pricing policy or new product line.A 7-member board of management composed of the managing director(CEO) and 6 other senior officers had final managerial authority. Theboard set policy, but seldom intervened in individual negotiations amongcompany units. But it would intercede when combined efforts, such as thoseof two or more product divisions, were needed to address an emergingmarket. Such actions were sometimes requested by a division manager, butthey were scrutinized carefully.Research and ManufacturingMoto had an extensive central research center, in addition to thedivision product development staffs. Research was a top priority andsource of pride. The 1982 central research budget was $650 million, 7% ofsales. This effort had resulted in numerous technological advancements andnew product introductions.Intense competition in its main product lines had caused Moto toautomate production for lower costs and quality improvement. Central584-074

Question

What are the main points of this case? SEXe1232- 3-Machine Toolsresearch and the country organizations worked to develop and apply newproduction methods. Moto employed the company's own equipment, such asnumerical controls and minicomputers, and had developed unique software andautomation techniques.584-074THE NUMERICAL CONTROL INDUSTRYMachine tools were power-driven equipment for shaping metal,either by cutting (over 80%) or forming. They were made primarily inEurope, the U.S. and Japan by original equipment manufacturers (OEMs) whotook great pride in machine precision and reliability. West Germanyaccounted for 40% of machine tools made in Europe.OEMS sold to end users, ranging from large, sophisticatedaircraft and automotive manufacturers, that shaped metal parts on assemblylines to &#34;job shops&#34; that fabricated workpieces in small batches or singleunits. Until the introduction of NCs, all machine tools were controlledmanually by highly skilled operators who followed a pattern drawn by adesign engineer. The operator used dials and handles to move the workpieceand tool.Numerical ControlsNCs were devices that, following a program, electronicallydirected the movements of the workpiece and tools, freeing the operatorfrom manual control. Early NCs were programmed through a paper tape, onwhich a production engineer punched a program using special tape writingmachines. The operator installed the proper tool (such as a drill bit),secured the workpiece, and then fed the tape through the NC.These early NCs doubled the capacity of a machine tool, ensuredthat all pieces met the same precise specifications, and increased laborproductivity; however, they were expensive, needed engineers who knew howto develop the programs, and required trained operators. During the 1950sand 1960s few machine tools were numerically controlled. The few end userstended to be large innovative manufacturers. U.S. defense contractors, inparticular, were compelled to use them, by the insistence of the U.S. AirForce. NC demand did not grow widely until the mid-1970s, when techno-logical innovations lowered costs and improved performance.Technological AdvancesThe key technological advance was the computerization of NCsenabling the writing and storage of &#34;software.&#34; Software was a general.program which an NC programmer used to write specific &#34;workpiece programs&#34;that were different but of the same general form. Early computerized NCsused minicomputers and were expensive, but in the mid-1970s the micro-computer allowed costs to drop and capacity and reliability to increase.By 1983 only a few minicomputer NCs were still produced; Moto made onlymicrocomputer NCS.584-074As NC computer hardware grew in capacity, software was developedto handle more complex and precise machine tool functions. Although someNC manufacturers licensed third party software houses, most wrote their ownsoftware for their units, and the writing of software grew to dominatedevelopment efforts. In 1982, 80% of ICD's NC development cost was forsoftware; development, in turn, accounted for 30% of total NC costs. ICDworked closely with its largest customers on software; but like othermakers, it used knowledge obtained from all its customers to developsoftware that could handle increasingly numerous and complex machine tool.functions. By 1983, software could automatically compensate tool speed fortool wear, increasing the &#34;up time&#34; of the machine. New &#34;user friendly&#34;software allowed machine tool operators to program a workpiece or batch,often in only a few minutes, without the help of a computer programmer.New software also enhanced the precision and quality of the workpieces.OEMS were developing machine tools that performed new and moresophisticated functions. A major advance was the introduction of machiningcenters, greatly expanded machine tools with multiple tools thatautomatically changed tools according to an NC program. These new toolsnecessitated more powerful NCs and new software. Moto made an NC that hadcapacity and software to control a machining center with up to 5 axes, 32tools, high power functions, and close tolerance.The early NC machine tools could not easily interface with othermachinery or outside operations. In the mid-1970s, programmablecontrollers (PCs) were developed. PCs were integrated with an NC andprovided data and signals to link the machine tool to other equipment. ICDmarketed a line of PCs separately from its NCs, because many OEMs boughtNCs and PCs from different suppliers. A PC required its own software, andthe PC's capacity and software determined how complex the interface betweenthe machine tool and other automated equipment could be.The first important use of PCs was loading and unloading.Conveyor belts moved a batch of workpieces one by one to be securedautomatically to the machine tool. The PC signaled the belt to move; aseach successive workpiece was secured, the PC checked alignment andsignaled the NC to start the program again. An operator could load a batch.of workpieces and let the machine tool run, tremendously enhancingproductivity.Although these advances made NC machine tools applicable to moreend-user operations and demand grew, in 1983 many end users still foundthat the programs did not adequately solve their manufacturing problems.Motofabrikwerk's RoleMoto entered the NC business in 1962 and worked only withEuropean machine tool OEMS. European OEMs, numbering less than 500 withsome building only a few specialized machines a year, proved reluctant toadopt NCs. Moto soon became the third largest NC vendor in Europe, behindSiemens and Philips. Siemens, based in Munich, gained the dominant sharein West Germany. In 1983, Moto sold to 21 European OEMs, only 6 of whombought more than 50 units in 1982. Some machine tool builders, such as 123DOZHarvard Business SchoolMOTOFABRIKWERK S.A. (A)9-584-074Rev. 6/85In August 1983, Mr. Hans Overmeyer, marketing vice president ofthe Industrial Controls Division (ICD) of Motofabrikwerk S.A. in Zurich,Switzerland, was reviewing his numerical control business. Numericalcontrols (NCs) were computerized devices which directed machine tools.Motofabrikwerk (Moto) sold NCs to machine tool builders who soldnumerically controlled machine tools to diverse end users.Moto entered the NC business in 1962 and by 1983 was the thirdlargest merchant supplier of NCs in Europe. ICD, however, reported a loss.of 5% of sales in 1982 and again for the first six months of 1983.Overmeyer attributed the losses to the sharp drop in worldwide demand formachine tools, caused by the most severe recession since the 1930s, and tointensifying competition. ICD faced both steeply declining competitiveprices and substantial expenses for continuing research and development.Overmeyer had to submit the 1984 development budget in earlySeptember and wondered whether the $3 million needed to maintain thebusiness could be justified. Some experts considered the prospects of theNC business as potentially enormous and others saw it offering a majorentry into the &#34;factory of the future.&#34; Moto, with a strong position inelectronic equipment and internal expertise in manufacturing automation,was among the few European concerns along with Siemens, Philips,Olivetti, and ASEA- which might have the resources and knowledge tocompete effectively in the emerging factory automation business.MOTOFABRIKWERKMoto reported 1982 revenues of SFr. 19.4 billion ($9.7 billion), ¹profits of SFr. 440 million ($220 million), assets of SFr. 20.3 billion($10.15 billion), and a solid balance sheet.In 1982, the Swiss franc (SFr.) exchanged for approximately $.50.This case was prepared by Research Assistant Edward J. Hoff, under thesupervision of Professor Benson P. Shapiro as the basis for classdiscussion rather than to illustrate either effective or ineffectivehandling of an administrative situation. Assistant Professor Frank V.Cespedes provided substantial editorial support.Copyright © 1984 by the President and Fellows of Harvard CollegemeansNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meelectronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.Distributed by HBS Case Services, Harvard Business School, Boston, MA 02163. Printed in U.S.A.584-074History- 2-584-074Two Swiss engineers founded Moto in 1902 to manufacture electricmotors for street cars and other machinery. In 1908, the company beganmanufacturing internal combustion engines for European automobile and truck.assemblers. After World War I, the company began producing electricgenerators, electrical parts such as starters for automobiles, andelectromechanical controls such as governors for electric motors.OrganizationAfter World War II, Moto again grew rapidly. Management used.knowledge gained from the electromechanical control business and extensiveR&D efforts to launch three additional major product lines: 1)sophisticated electronic testing and measuring instruments, such asadvanced volt and current meters, 2) products that controlled certainmanufacturing operations, including numerical controls, and 3) integratedcircuits and minicomputers, introduced in 1969.Moto's organization had evolved into a matrix, with both productdivisions and country organizations, and with profit and revenue figureskept by each structure. In 1983, Moto had 7 product divisions, each run bya general manager. (Exhibit 1 lists the divisions and their 1982revenues.) The 29 country organizations, each run by a country manager,had responsibility for sales, manufacturing, and administration for allMoto products sold or made in that country. Europe accounted for 65% oftotal revenues, and the U.S. for 22%.Each product line sales force was organized by country andreported through the country organizations. The marketing and productdevelopment staff reported through the product divisions. The sales forceworked with the product division staff to adapt product to a particularcountry's needs. Division management had to work with the management ineach country to introduce a new pricing policy or new product line.A 7-member board of management composed of the managing director(CEO) and 6 other senior officers had final managerial authority. Theboard set policy, but seldom intervened in individual negotiations amongcompany units. But it would intercede when combined efforts, such as thoseof two or more product divisions, were needed to address an emergingmarket. Such actions were sometimes requested by a division manager, butthey were scrutinized carefully.Research and ManufacturingMoto had an extensive central research center, in addition to thedivision product development staffs. Research was a top priority andsource of pride. The 1982 central research budget was $650 million, 7% ofsales. This effort had resulted in numerous technological advancements andnew product introductions.Intense competition in its main product lines had caused Moto toautomate production for lower costs and quality improvement. Central584-074

Accepted Answer

The case study focuses on Mr. Hans Overmayer, the marketing vice president of Motofabrikverk S.A.'s…